Non-KYC exchanges - premium over spot

[brainactive]

I had a look at some non-KYC exchanges such as localbitcoin. Was surprised to find that the premium over spot is around 10-30%.

1) What is the reason for such a high premium?
2) Are there people who buy from KYC exchanges at spot price and then sell at non-KYC exchanges? Or are KYC-exchange bitcoins "tainted" and not allowed to be sold there?

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[Ayiranorea]

Localbitcoins is a KYC exchange. Whether you need to buy/sell it is a must to have verified KYC. The profit margin varies depending upon the traders. What you think can be done if there is price difference between countries. Apart from this arbitrage trading is possible between exchanges, but most of the time the exchange crossing all fee and other expenses final price will be almost the same.

[Charles-Tim]

I had a look at some non-KYC exchanges such as localbitcoin. Was surprised to find that the premium over spot is around 10-30%.

Localbitcoins is a kyc exchange

1) What is the reason for such a high premium?

For example, if the central Bank of a country ban Bitcoin, it can lead to it. What can make people to panic about Fiat can result to Bitcoin premium price in a country, like war.

2) Are there people who buy from KYC exchanges at spot price and then sell at non-KYC exchanges? Or are KYC-exchange bitcoins "tainted" and not allowed to be sold there?

I am not into arbitrage, but this is what I experienced even Nigeria Central Bank ban cryptocurrencies. When the price of bitcoin was at $35000 or around that price, I saw it at a price of $50000 or above on some exchanges, but I was not able to sell cryptocurrencies again on the exchanges, but it was all over the news that Bitcoin was selling in Nigeria at premium price. On all exchanges that it can be traded p2p, the price was and is still now normal bitcoin price, even if it seem high to you, you will notice it is still normal price after you end up trading the bitcoin to Fiat.

Know that Bitcoin is not selling at premium price on no-kyc exchanges, if the price on the p2p increased on kyc exchanges, expect the price to have increased on no kyc exchanges as well.

[brainactive]

I am not into arbitrage, but this is what I experienced even Nigeria Central Bank ban cryptocurrencies. When the price of bitcoin was at $35000 or around that price, I saw it at a price of $50000 or above on some exchanges, but I was not able to sell cryptocurrencies again on the exchanges, but it was all over the news that Bitcoin was selling in Nigeria at premium price. On all exchanges that it can be traded p2p, the price was and is still now normal bitcoin price, even if it seem high to you, you will notice it is still normal price after you end up trading the bitcoin to Fiat.

Know that Bitcoin is not selling at premium price on no-kyc exchanges, if the price on the p2p increased on kyc exchanges, expect the price to have increased on no kyc exchanges as well.

I'm not into arbitrage either. Normally with the common exchanges, the differences in price are miniscule (less than 0.5%). With localbitcoins, I'm seeing differences of up to 30% compared to normal exchanges (in countries where bitcoin is not banned). What's going on here?

[BrianH]

I had a look at some non-KYC exchanges such as localbitcoin. Was surprised to find that the premium over spot is around 10-30%.

1) What is the reason for such a high premium?
2) Are there people who buy from KYC exchanges at spot price and then sell at non-KYC exchanges? Or are KYC-exchange bitcoins "tainted" and not allowed to be sold there?

1. People like their privacy and are willing to pay for it. Also, some trades are old. No one is going to pay the 30% if there are better options. Different payment methods provide more or less security/privacy, so the premium reflects that. (i.e. digital payments for crypto can sometimes be reversed - the premium will be less, because these are riskier)
2. Yes, there is undoubtedly some arbitrage going on.

You can pay close to spot prices on bisq.

[brainactive]

1. People like their privacy and are willing to pay for it. Also, some trades are old. No one is going to pay the 30% if there are better options.

That's what I'm trying to figure out - are people actually willing to pay 30% extra for privacy or is there another reason why the premium is so high. Because if people are willing to pay 30%, to me that seems ridiculous and I'd be willing to sacrifice my privacy to meet the demand.

[pooya87]

It's usually because of supply and demand.
The non-KYC methods of buying bitcoin are usually rarer and harder to come by so when there is a handful of offers they can ask for any price they want and that creates a higher premium.
I don't think arbitrage is that profitable otherwise traders would have done it and brought down the price to what we see on centralized KYC exchanges.

[Jawhead999]

Usually people want to buy Bitcoin in premium price mostly a scammer since they use reversible payment method (e.g. bank account, paypal etc) or they are a thief that use hacked bank account to buy large sum of Bitcoin.

You need to be careful if you want to trade on P2P platform, be sure to read how the escrow works, how to trade safely and don't made any deal outside of the platform.