How is the Exchange Rate of Bitcoin to USD and Other Currencies Determined?

[Alphakilo]

If I visit these websites, each one offers so much valuable information surrounding cryptocurrency world. These platforms include Binance, Luno, Cointelegraph, Coinbase, CEX.IO, crypto.com, and coinmarketcap. The first thing that catches my attention when once the web pages open is the prominently displayed real-time (live) charts depicting the price of Bitcoin in USD. I enjoy looking at the charts because they provide a detailed visual representation of Bitcoin's value fluctuations over time. It allows a bitcoin enthusiast like me to keep track the market movements without stress. however, what consistently boggles my mind is the question of how is the exchange rate of Bitcoin to USD and other currencies determined?

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[ranochigo]

Supply and demand. Each exchange has separate markets for each currency which fluctuates based on the recent trades. You can see the offers to buy and the offers to sell.

Your demand is actually adjusted to the real FX rates of your fiat, but with some degree of lag as well. In addition, price tends to differ a bit between exchanges but they generally tend towards a certain price. That's where the arbitrage opportunities comes in.

[Charles-Tim]

Supply and demand. Each exchange has separate markets for each currency which fluctuates based on the recent trades. You can see the offers to buy and the offers to sell.

Exactly. But on exchanges and other trading platforms. Which is also where other sites take their price from.

Those like Cointelegraph which is a news site is different. Also the price on Coingecko and Coinmarketcap are different. The exchange and coin listing sites take the average price from all the exchanges they listed on their platform.

[20kevin20]

Most of the volume is in USDT, USDC and other stablecoins because that’s how traders usually work. It’s much riskier to trade against other alts. So the live chart is mostly the most recent USDT transaction. Whether that was a sell or a buy, it’s that price.

Otherwise, if we include all pairs, the algorithm is much more complex. It’s not impossible nor is it necessarily hard to calculate, but I don’t see the point really unless the coin has a very low volume. Big exchanges have huge volume so it’s pointless to make complex calculations. Moreover, it’s a kinda risky business too. If you include all pairs in the calculation process, then you’re about to include pairs with extremely low volume too - which may temporarily significantly influence the calculation at some point.

Anyway, if there’s a high volume BTC-USD pair and a low volume BTC-LTC pair, even then the difference between the USD valuation of both pairs can’t be significant for too long either due to traders quickly finding out about the difference and eliminating it through trades for profit.

[MusaMohamed]

It allows a bitcoin enthusiast like me to keep track the market movements without stress.

The more time you look at price or chart, more stress you will have, not less.

Watching price, looking at chart and reading news are bad combination to make you mores stressful and more emotional in this volatile market. If you don't look at price after like 3 or 6 months, it can be the same.

If you watch and read it daily, your nerves will more stressful fluctuate with price.

[Doan9269]

what consistently boggles my mind is the question of how is the exchange rate of Bitcoin to USD and other currencies determined?

As you've already been told earlier from previous comments, the exchange rate of any currency depends on their demand and supply rate in comparison to the value on it and the worth each currency is in respect to USD, when the market surges and the demands increases, there's more possibilities for an increase in the price value and therefore the market rises and the exchange rate increases as well and take effect immediately, marketers uses this informations on this gotten from reliable exchanges and trading platforms to form their average price after series of collections on various market price from different platforms.

[Denise09]

The exchange rate of Bitcoin is primarily influenced by the fundamental economic principle of supply and demand. When there is high demand for Bitcoin and limited supply available for sale, the price of Bitcoin tends to rise.

[CryptoHeadlineNews]

However, what consistently boggles my mind is the question of how is the exchange rate of Bitcoin to USD and other currencies determined?

Just as bonds, stocks, gold and the value of other assets are tied to the US dollar, which is the world's most traded digital/physical currency, so is the value of Bitcoin tied to it also, whose value fluctuates due to demand and supply just as "ranochigo" earlier said above. But another thing you need to understand that the value of Bitcoin in fiat is determined by the value of that fiat currency to the US dollar, which is always controlled by the government of that nation with respect to its economic stability or instability.

Example:
We all know the price of Bitcoin have been around $30k for the past 1 months now, right?
2 weeks ago the value of Nigerian naira to dollar was #750 per $1
But today, the value of Naira have fallen, and $1 is now #850
So, 2 weeks ago when $1 was #750, for you to buy 1BTC, you needed to have #750 x $30,000 = #22,500,000

But today, for you to afford 1BTC now, you need #850 x $30,000 = #25,500,000

Note: which means that the value of BTC didn't increase, but the value of my fiat currency dropped, which is another factor that determines value of currencies

[Helena Yu]

Keep in mind, you and most users are talking about centralized exchange, not decentralized exchange or P2P. All centralized exchanges always rely with the average price of every centralized exchanges, this is why the price almost similar with one to another.

While decentralized exchange or P2P, the price is only depend on supply and demand. Right now Bitcoin price is $29,200, but people might be willing to buy Bitcoin for $28,000 or $31,000 depend on the seller.

[KalOlak]

If I visit these websites, each one offers so much valuable information surrounding cryptocurrency world. These platforms include Binance, Luno, Cointelegraph, Coinbase, CEX.IO, crypto.com, and coinmarketcap. The first thing that catches my attention when once the web pages open is the prominently displayed real-time (live) charts depicting the price of Bitcoin in USD. I enjoy looking at the charts because they provide a detailed visual representation of Bitcoin's value fluctuations over time. It allows a bitcoin enthusiast like me to keep track the market movements without stress. however, what consistently boggles my mind is the question of how is the exchange rate of Bitcoin to USD and other currencies determined?

The BTC/USD price is determined solely on exchanges that have the BTC/USD trading pair. For example, Binance does not have such a pair, so Binance influences the BTC price solely through the USDT and USD arbitrage on Bitfinex.

BTC/USD pair has some exchanges: Coinbase, Bitfinex, Kraken, LMAX, Bitstamp, Gemini... maybe 2 or 3 smaller axchanges and that's all folks.

External market makers or market makers affiliated with the exchange conduct inter-exchange arbitrage. For instance, if Bitcoin becomes slightly cheaper on Bitfinex compared to Coinbase, they buy Bitcoin on Bitfinex and sell it on Coinbase and vice versa.

[AHOYBRAUSE]

Supply and demand. Each exchange has separate markets for each currency which fluctuates based on the recent trades. You can see the offers to buy and the offers to sell.

Your demand is actually adjusted to the real FX rates of your fiat, but with some degree of lag as well. In addition, price tends to differ a bit between exchanges but they generally tend towards a certain price. That's where the arbitrage opportunities comes in.

On point.

Another big factor often enough is also news.
As soon as for example China hinted whatever bans of crypto, the price dropped. Tesla announces to buy btc and/or the possibility to pay for your car in btc, the price went up. It's still supply and demand since because of these news the demand to buy btc in hopes of a raise of price goes up, but still the influence is there.

Crypto is a strange thing still. So hard to see through every detail.

[KalOlak]

Supply and demand. Each exchange has separate markets for each currency which fluctuates based on the recent trades. You can see the offers to buy and the offers to sell.

Your demand is actually adjusted to the real FX rates of your fiat, but with some degree of lag as well. In addition, price tends to differ a bit between exchanges but they generally tend towards a certain price. That's where the arbitrage opportunities comes in.

On point.

Another big factor often enough is also news.
As soon as for example China hinted whatever bans of crypto, the price dropped. Tesla announces to buy btc and/or the possibility to pay for your car in btc, the price went up. It's still supply and demand since because of these news the demand to buy btc in hopes of a raise of price goes up, but still the influence is there.

Crypto is a strange thing still. So hard to see through every detail.

To change price you need place market buy or sell. News can't change price, lol.

[KalOlak]

While decentralized exchange or P2P, the price is only depend on supply and demand. Right now Bitcoin price is $29,200, but people might be willing to buy Bitcoin for $28,000 or $31,000 depend on the seller.

Decentralized exchanges and P2P just make arbitrage on centralized exchange + you pay double or even triple fee.

[Latviand]

I'm not sure about other currencies but other currencies are pegged to their USD value so basically USD is the only rate we follow for BTC and the other currency just follows the value of USD in their local exchange rate. It's funny how simple we can determine the prices but if we were to investigate further then we will see that it's a whole can of worms, the demand is influenced by other factors too that I am too lazy to mention.

[BlackHatCoiner]

While decentralized exchange or P2P, the price is only depend on supply and demand.

Actually, even P2P, decentralized exchanges do depend on other price indices, like centralized exchanges'. For example, you can check on Bisq[1]. It fetches the latest price data from various providers once per minute. The more the providers, the less it depends on each one as it calculates the average.

I'm not sure about other currencies but other currencies are pegged to their USD value so basically USD is the only rate we follow for BTC and the other currency just follows the value of USD in their local exchange rate.

Which currencies are "pegged" to their USD value? And what do you mean exactly?

[1] https://bisq.wiki/Bisq_Price_Indices

[Latviand]

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Which currencies are "pegged" to their USD value? And what do you mean exactly?

[1] https://bisq.wiki/Bisq_Price_Indices

Philippine peso is one, what I mean by what I was talking about is that the value of PHP in BTC is the same exchange rate as PHP to USD, so like if 1 USD is 55 PHP then the equivalent of 1 USD in BTC is the same as 55 PHP.  Also thanks for the link, not gonna use it though since I don't understand the graphs, hope you can explain it.

[OgNasty]

I'm not sure about other currencies but other currencies are pegged to their USD value so basically USD is the only rate we follow for BTC and the other currency just follows the value of USD in their local exchange rate. It's funny how simple we can determine the prices but if we were to investigate further then we will see that it's a whole can of worms, the demand is influenced by other factors too that I am too lazy to mention.

Pretty much everything is always valued in USD when speaking internationally. This is because the US Dollar is the world’s reserve currency. As far as how the exchanges calculate the price, they just use the last trade on their exchange. It’s good that each exchange can carry a different price as it allows for arbitrage and price divergence can also foretell potential issues.

[FatFork]

what consistently boggles my mind is the question of how is the exchange rate of Bitcoin to USD and other currencies determined?

How is the price of anything in this world determined? It's the sweet spot where sellers and buyers come together and agree on a value for whatever's being traded. If there's demand for something, and people are willing to pay a certain amount for it, that's how its price gets set. Simple as that!

As for the sites you mentioned, some of them take the current price from a bunch of different markets and exchanges. Then they crunch the numbers, calculating the average value, and finally, they show it to you as the current exchange rate.

[Agbe]

Supply and demand. Each exchange has separate markets for each currency which fluctuates based on the recent trades. You can see the offers to buy and the offers to sell.

Exactly. But on exchanges and other trading platforms. Which is also where other sites take their price from.

Those like Cointelegraph which is a news site is different. Also the price on Coingecko and Coinmarketcap are different. The exchange and coin listing sites take the average price from all the exchanges they listed on their platform.

And that is why the prices of the demand and supply of each exchange is different. People like Binance for buying and selling of bitcoin and other cryptocurrencies because they have the best price scale in the cryptocurrency world. If vendors in Binance buying $29,126 to 1 BTC = #27,320,030,96 as Nigeria Fiat Currency other exchange like Busa, Ramitano and Paxful price would be lesser than Binance, so the exchanges operate different base on the fluctuating nature of bitcoin.

[TimeTeller]

Supply and demand. Each exchange has separate markets for each currency which fluctuates based on the recent trades. You can see the offers to buy and the offers to sell.

Exactly. But on exchanges and other trading platforms. Which is also where other sites take their price from.

Those like Cointelegraph which is a news site is different. Also the price on Coingecko and Coinmarketcap are different. The exchange and coin listing sites take the average price from all the exchanges they listed on their platform.

And that is why the prices of the demand and supply of each exchange is different. People like Binance for buying and selling of bitcoin and other cryptocurrencies because they have the best price scale in the cryptocurrency world. If vendors in Binance buying $29,126 to 1 BTC = #27,320,030,96 as Nigeria Fiat Currency other exchange like Busa, Ramitano and Paxful price would be lesser than Binance, so the exchanges operate different base on the fluctuating nature of bitcoin.

As you can see the law of supply and demand acts quite differently from one exchange to another.
Let us say a very small exchange, since the trading volume is small and maybe the sell orders are higher than the buy orders,
the seller can lower his price if he wants to execute his order fast. And that price may be different from the selling price in binance or coinbase.
This is why a lot are interested in trading with binance or other top exchanges because they can get a very good deal and quite faster.
So yes, the supply and demand concept greatly contributes to the price movement of the currency on every trading platform.