Is it possible to exploit the different prices for BTC on different exchanges?

[Reclaim3r]

I've noticed that their are small inconsistencies with Bitcoin to USD exchanges, and how the value for BTC appears to be different.

What if, I were to buy 1 Bitcoin from BTC-e for $637.00 and then sell it again on Bitstamp for $643.85?
To me, it looks like it could be pulled off, but how come I've never heard of "exchange jumpers"? People who buy cryptos on one exchange for the lowest price possible and then re-sell on a different exchange, reaping the profits of the small inconsistencies? Is it too cumbersome or are the profits simply not worth it? Why do these price inconsistencies exist on exchanges? 

[DolanDuck]

Yep, it is called arbitrage:

In economics and finance, arbitrage is the practice of taking advantage of a price difference between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices.
When used by academics, an arbitrage is a transaction that involves no negative cash flow at any probabilistic or temporal state and a positive cash flow in at least one state; in simple terms, it is the possibility of a risk-free profit after transaction costs.
For instance, an arbitrage is present when there is the opportunity to instantaneously buy low and sell high.

In principle and in academic use, an arbitrage is risk-free; in common use, as in statistical arbitrage, it may refer to expected profit, though losses may occur, and in practice, there are always risks in arbitrage, some minor (such as fluctuation of prices decreasing profit margins), some major (such as devaluation of a currency or derivative).
In academic use, an arbitrage involves taking advantage of differences in price of a single asset or identical cash-flows; in common use, it is also used to refer to differences between similar assets (relative value or convergence trades), as in merger arbitrage.

[dmz241]

There was a scam website doing this. btc-arbs.com or .net I forget the exact website. But think about this. You pull out of btc-e you pay a fee then you transfer into bitstamp you pay a fee. In between you also have pay fee for conversion to fiat. Plus the process of pull and put will take around 60 mins or so on the network. Can you be sure the price difference will still be there? and you can cover all the mentioned fees?

[Reclaim3r]

Thank you DolanDuck and dmz241
What if I found a crypto with a worthwhile gap?
And is Arbitrage bad for the cryptoconomy?

[CEG5952]

BTC moves too quick for real arbitrage (e.g. buy BTC on BTC-E, sell on Bitstamp, withdraw fiat and re-deposit on BTC-E). But since the spread narrows and widens, you can take advantage by, for instance, buying on BTC-E, selling on Bitstamp, and waiting for the spread to close before buying and sending back to BTC-E.

[SelbyTsang]

I've noticed that their are small inconsistencies with Bitcoin to USD exchanges, and how the value for BTC appears to be different.

What if, I were to buy 1 Bitcoin from BTC-e for $637.00 and then sell it again on Bitstamp for $643.85?
To me, it looks like it could be pulled off, but how come I've never heard of "exchange jumpers"? People who buy cryptos on one exchange for the lowest price possible and then re-sell on a different exchange, reaping the profits of the small inconsistencies? Is it too cumbersome or are the profits simply not worth it?

Don't forget to take the deposit fees and withdrawal fees into consideration.

Why do these price inconsistencies exist on exchanges? 

For bitstamp, international wire transfer in USD costs 0.1% (min $15).
For btc-e, international wire transfer in USD costs 1% (min $20).

This is just one difference, and there are many more differences.

[SelbyTsang]

There was a scam website doing this. btc-arbs.com or .net I forget the exact website.

It is a .com, and looks like people have lost over 230 btc there.
https://bitcointalk.org/index.php?topic=474787.msg7127947#msg7127947

[SelbyTsang]

What if I found a crypto with a worthwhile gap?

If there is still a profit after considering all the fees and you have checked that both exchanges work, I don't see any problem.

And is Arbitrage bad for the cryptoconomy?

Nope.
Arbitrage exists in other markets like forex, and it helps reduce price gap and stabilize the markets.

[galbros]

This is much easier with your altcoin(s) of choice than with bitcoins, but yes you can, yes it happens all the time.  The bitcoin market is the most well developed so it offers few opportunities but the altcoin markets since they are so thin offer lots of chances.

Good Luck!

[Reclaim3r]

Thank you for all the awesome answers, they all did a great job of explaining things. My last question related to arbitrage is this: Does anybody know a trader who's actually been successful pulling it off with cryptocurrencies?

[Loophole]

I've noticed that their are small inconsistencies with Bitcoin to USD exchanges, and how the value for BTC appears to be different.

What if, I were to buy 1 Bitcoin from BTC-e for $637.00 and then sell it again on Bitstamp for $643.85?
To me, it looks like it could be pulled off, but how come I've never heard of "exchange jumpers"? People who buy cryptos on one exchange for the lowest price possible and then re-sell on a different exchange, reaping the profits of the small inconsistencies? Is it too cumbersome or are the profits simply not worth it? Why do these price inconsistencies exist on exchanges? 

Found the page http://bitcoin-analytics.com/#arbitrage with google search for you.
It shows the price differences for more than 10 different exchanges (in real-time after login, 6 hrs delay otherwise).

[OnkelPaul]

I think most traders will exploit an arbitrage situation occasionally (even I, not being a trader, could make some mBTC from an arbitrage opportunity within Ripple some time ago), but it probably does not make much sense to concentrate on arbitrage exclusively.

Onkel Paul

[Muhammed Zakir]

BTC moves too quick for real arbitrage (e.g. buy BTC on BTC-E, sell on Bitstamp, withdraw fiat and re-deposit on BTC-E). But since the spread narrows and widens, you can take advantage by, for instance, buying on BTC-E, selling on Bitstamp, and waiting for the spread to close before buying and sending back to BTC-E.

Thanks, Sir!  . It is a good statement for making profit with BTC .
Kindly,
       Muhammed Zakhir

[Gargulan]

Getting harder to exploit market inefficiency.

[ShameOnYou]

I think most traders will exploit an arbitrage situation occasionally (even I, not being a trader, could make some mBTC from an arbitrage opportunity within Ripple some time ago), but it probably does not make much sense to concentrate on arbitrage exclusively.

Onkel Paul

I would agree that it doesn't make sense to concentrate on arbitrage exclusively, certainly with bitcoin. But I do watch the divergence between BTCE and Stamp, and exploit it sometimes.

[ampere9765]

I dont really bother with arbitrage. BTC is so volatile that it just seems more practical to ride the waves for much more profit than to pick up 1% here and there on arbitrage. But I do realize that arbitrage is pretty much guaranteed money, so there's that.

[jjc326]

I think a lot of people actually use the arbitrage to get a nice profit.  If you're doing it enough, even at 2% you can make a lot.  I think your best bet though is not to try it between the 2 major exchanges.  I would try to buy some cheaper on something like localbitcoins and then you can sell on exchange or some other services for more and get a bigger price difference, like 10% even I think.

[ampere9765]

I think a lot of people actually use the arbitrage to get a nice profit.  If you're doing it enough, even at 2% you can make a lot.  I think your best bet though is not to try it between the 2 major exchanges.  I would try to buy some cheaper on something like localbitcoins and then you can sell on exchange or some other services for more and get a bigger price difference, like 10% even I think.

Better yet, on Localbitcoins, if you build up a reputation as a buyer and seller, you can buy/sell with a fat (5-7%) premium vs. exchange prices.

[PolarPoint]

Arbitrage is profitable if you already have fiat and bitcoin in the exchanges, so you can buy and sell at the same instant. If you send funds when you spot a margin, it is already too late. The current margin between exchanges are too small to make any arbitrage worthwhile.

[Reclaim3r]

I'll remember not to focus too much on make money from arbitrage
Now that PolarPoint mentioned the fact you should have fiat and cryptocurrency ready to go, I kinda wish all the crypto exchanges would use one centralized user wallet so you wouldn't have to distribute specified portions of your crypto or fiat on different exchanges.