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Author Topic: Why are the exchanges so intertwined?  (Read 2560 times)
cafucafucafu
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September 01, 2014, 04:14:44 PM
 #1

If the price changes on an exchange then the change is seen very quickly on other exchanges? Why is this? Do the exchanges ensure this or the users? Or is it bots which access many exchanges at once?

I can't see users reacting so quickly to a price changes and actually implementing those changes on other exchanges.


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BitCoinNutJob
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September 01, 2014, 04:15:56 PM
 #2

arbitrage - people make profit via the different exchange spreads, bigger gap = bigger profit so gaps close quick.
cafucafucafu
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September 01, 2014, 04:21:20 PM
 #3

arbitrage - people make profit via the different exchange spreads, bigger gap = bigger profit so gaps close quick.

It takes long to transfer BTC. These changes happen very quickly so it can't be arbitrage . Sometimes there is always a gap in prices. E.g. There was a time when Bitfinex was always higher than Bitstamp by a few dollars. If arbitrage was the answer then why that gap?


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DannyHamilton
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September 01, 2014, 04:41:49 PM
 #4

This is how open and free markets work.

If you have bitcoins to sell, where are you going to sell them?  Will you choose to sell them at the exchange that is paying you the most for your bitcoins, or the exchange that is paying you the least?  Clearly, anyone with a financial incentive is going to choose to sell at the exchange that will get them the most.  This increases the supply at that exchange.

The result of an increased supply without an equivalent increase in demand is a falling exchange rate.

If you want to buy bitcoins, where are you going to buy them?  Will you choose to buy them at the exchange that is getting you to most bitcoins for your money, or the exchange that is getting you the least bitcoins?  Clearly anyone with a financial incentive is going to choose to buy at the exchange that will get them the most.  This increases the demand at that exchange.

The result of  an increased demand without an equivalent increase in supply is a rising exchange rate.

Eventually the exchange rates reach an equilibrium where the costs and conveniences associated with each exchange determine how much higher or lower they all are from each other.  Occasionally, due to variations in the volume of transactions, the exchanges may drift apart a bit in exchange rate, but eventually market forces bring them back in line with each other.

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September 01, 2014, 04:48:42 PM
 #5

arbitrage - people make profit via the different exchange spreads, bigger gap = bigger profit so gaps close quick.

It takes long to transfer BTC. These changes happen very quickly so it can't be arbitrage . Sometimes there is always a gap in prices. E.g. There was a time when Bitfinex was always higher than Bitstamp by a few dollars. If arbitrage was the answer then why that gap?

If the exchange with higher price allow shorting btc, you can buy on exchange with lower price and then simultaneously short the same amount to lock in the price.

Then transfer the btc from exchange with lower price and close the entire position after bitcoin arrived.
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September 01, 2014, 04:49:29 PM
 #6

arbitrage - people make profit via the different exchange spreads, bigger gap = bigger profit so gaps close quick.

It takes long to transfer BTC. These changes happen very quickly so it can't be arbitrage ....

Yes it can be can arbitrage:
Someone with deep enough pockets (and a tolerance for risk) can have a good sized amount of BTC and cash on several different exchanges. That way you do not always have to wait for the BTC to transfer, and (in this case) none of the exchanges need to allow 'going short' on BTC.

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September 01, 2014, 04:51:23 PM
 #7

arbitrage - people make profit via the different exchange spreads, bigger gap = bigger profit so gaps close quick.

It takes long to transfer BTC. These changes happen very quickly so it can't be arbitrage . Sometimes there is always a gap in prices. E.g. There was a time when Bitfinex was always higher than Bitstamp by a few dollars. If arbitrage was the answer then why that gap?
If someone already has both fiat and BTC at two exchanges then they can potentially buy BTC on one exchange and sell it on another without needing to transfer bitcoin from exchange to exchange. 
franky1
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September 01, 2014, 04:56:42 PM
 #8

arbitrage - people make profit via the different exchange spreads, bigger gap = bigger profit so gaps close quick.

arbittrage is only 10% at play.. its more 90% sheeple panic

as proven by the china spike, where trying to move american dollar to chinese exchanges and chinese yuan to american exchanges is not a fast process..

and also proven by the mtgox saga, where mtgox closed its banks and was crashing below the $650 price of other exchanges in spring 2014 (down to $100) and other exchanges began following it down. (well untill a group of people were literally copying and pasting in all trollchats and irc's to 'wake up and not follow gox as its separate and closed off')

I DO NOT TRADE OR ACT AS ESCROW ON THIS FORUM EVER.
Don't take any information given on this forum on face value. Please do your own due diligence & respect what is written here as both opinion & information gleaned from experience. If you wish to seek legal FACTUAL advice, then seek the guidance of a LEGAL specialist.
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September 01, 2014, 05:05:51 PM
 #9

arbitrage - people make profit via the different exchange spreads, bigger gap = bigger profit so gaps close quick.

It takes long to transfer BTC. These changes happen very quickly so it can't be arbitrage . Sometimes there is always a gap in prices. E.g. There was a time when Bitfinex was always higher than Bitstamp by a few dollars. If arbitrage was the answer then why that gap?
If someone already has both fiat and BTC at two exchanges then they can potentially buy BTC on one exchange and sell it on another without needing to transfer bitcoin from exchange to exchange. 

And that is how it is done!

BTCulture
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September 01, 2014, 06:20:21 PM
 #10

Just simple supply and demand.
franky1
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September 01, 2014, 08:00:32 PM
 #11

Just simple supply and demand.

thats so high school level education...

you migt aswell also say that sex is just about a penis entering th vagina.. just liek they teach in high school..

what you forget is the psychology part
bitcoin: greed, smart investment, belief to safeguard against fiat failure
sex: attraction, desire, lust, love

you forget about the usefulness part
bitoin: faster than wire transfer, irreversible, deflationary, rare
sex: fun, procreation, help hormone control

sex is not simply about boy demand a girls vagina. and girl supplies it..
bitcoin is not simply about investor demands coin. and miners supplies it..

i truly hate sheeple that only graze on the green grass provided to them and not try to dig their own paths into different fields of input to ingest

I DO NOT TRADE OR ACT AS ESCROW ON THIS FORUM EVER.
Don't take any information given on this forum on face value. Please do your own due diligence & respect what is written here as both opinion & information gleaned from experience. If you wish to seek legal FACTUAL advice, then seek the guidance of a LEGAL specialist.
Bit_Happy
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September 01, 2014, 08:10:56 PM
 #12

Just simple supply and demand.

thats so high school level education...

you migt aswell also say that sex is just about a penis entering th vagina.. just liek they teach in high school..

what you forget is the psychology part
bitcoin: greed, smart investment, belief to safeguard against fiat failure
sex: attraction, desire, lust, love

you forget about the usefulness part
bitoin: faster than wire transfer, irreversible, deflationary, rare
sex: fun, procreation, help hormone control

sex is not simply about boy demand a girls vagina. and girl supplies it..
bitcoin is not simply about investor demands coin. and miners supplies it..

i truly hate sheeple that only graze on the green grass provided to them and not try to dig their own paths into different fields of input to ingest

Just simply Greed and Fear combined with supply and demand.  Cheesy
Seriously, at the core, some things really are that clear and easy.

HarHarHar9965
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September 01, 2014, 08:19:03 PM
 #13

Users of exchanges will anticipate arbitrage. So if price changes a lot on one exchange, traders on other exchanges will move in that direction.

This is my position -- I don't think it's really arbitrage that does it in most cases. As fast as bitcoin moves, it's still not fast enough. So traders are filling the gap.

More than anything, western exchanges follow moves on Chinese exchanges, expecting them to be followed across the market.
RobertDJ
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September 01, 2014, 08:29:54 PM
 #14

I would disagree that the exchanges are intertwined. Their prices all move together, but they do little/no business with each-other. If one exchange were to close down for whatever reason, the other exchanges would not be affected (other then the potential for increased business).
cafucafucafu
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September 01, 2014, 11:21:31 PM
 #15

Users of exchanges will anticipate arbitrage. So if price changes a lot on one exchange, traders on other exchanges will move in that direction.

This is my position -- I don't think it's really arbitrage that does it in most cases. As fast as bitcoin moves, it's still not fast enough. So traders are filling the gap.

More than anything, western exchanges follow moves on Chinese exchanges, expecting them to be followed across the market.

Its amazing how a dip on a western exchange with little volume affects the big chinese exchanges!!


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September 02, 2014, 05:35:21 AM
 #16

Because many people doing arb

HOLD your bitcoins.
waterpile
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September 02, 2014, 07:42:10 AM
 #17

I would disagree that the exchanges are intertwined. Their prices all move together, but they do little/no business with each-other. If one exchange were to close down for whatever reason, the other exchanges would not be affected (other then the potential for increased business).

I don't think so. try to buy big orders and compare the prices to another exchanger and you will see that they don't all move together
wasserman99
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September 04, 2014, 06:52:02 AM
 #18

I would disagree that the exchanges are intertwined. Their prices all move together, but they do little/no business with each-other. If one exchange were to close down for whatever reason, the other exchanges would not be affected (other then the potential for increased business).

I don't think so. try to buy big orders and compare the prices to another exchanger and you will see that they don't all move together
The prices do move together but this is not because the exchanges are in any way connected. It is because when the price on one exchange moves, people will attempt to use arbitrage to exploit minor differences in the prices between exchanges. So for example if the price declined on exchange A someone would sell bitcoin on exchange B (which has bitcoin trading at higher levels) and buy an equal amount on exchange A

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September 04, 2014, 03:34:41 PM
 #19

What do you mean intervened? crypto exchanges are 100% free, wild wild west.
BitcoinBadger
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September 04, 2014, 03:45:03 PM
 #20

If the price changes on an exchange then the change is seen very quickly on other exchanges? Why is this? Do the exchanges ensure this or the users? Or is it bots which access many exchanges at once?

I can't see users reacting so quickly to a price changes and actually implementing those changes on other exchanges.
I guess the bots do it.Nowadays any forex traders have jumped onto bitcoin trading.
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