BigBit World – All about Bitcoin Arbitrage

    65
    SHARE

    As the price of Bitcoin continues to skyrocket and Bitcoin adoption realises rapid growth, we have more and more customers searching for the price of Bitcoin and asking us:

    “Why is the Bitcoin price so high/low on Google compared to the price shown on other exchanges?”

    1

    When reviewing the Bitcoin price, it is important to remember that there’s no standard or global Bitcoin price. Bitcoin isn’t pegged in any way to the USD or to any other currency, country or any exchange.

    It’s almost like asking: “Why does a bag of rice cost more in one supermarket, city or country compared to another?”. The short answer is “because of supply and demand”, but let’s dive in a little deeper for a more detailed look.

    The “Google” rate

    When you type in “1 BTC to USD” in Google, you might get a result like the one below.

    2

    The rate provided by Google and other Bitcoin price trackers is usually just an average estimate or a recently traded price of Bitcoin on some international Bitcoin exchange. Google makes use of the Coinbase API, which gives an estimated price in US dollar, excluding fees.

    Even if you had US dollar in a Coinbase account, the price you’ll end up paying for your Bitcoin will be different than the “Google price”, due to fees and many other factors.

    3

    On supply and demand

    Bitcoin exchanges are places where people who have Bitcoin (supply) can sell it to those who want it (demand). This also means that if you have two exchanges —Exchange A and Exchange B— that both support USD and BTC, it doesn’t mean that the price of Bitcoin will be the same on both of them. The price will simply be whatever supply and demand dictates.

    If an exchange sees more people selling than they are buying, the price is likely to drop, as supply outweighs demand. The same goes for more people buying on that particular exchange, should demand outweigh supply, the price will go up.

    Arbitrage

    So, if you’ve got Bitcoin trading at different prices on different exchanges, isn’t there money to be made?

    If I can sell 1 BTC for 2,200 USD on an exchange, but 1 BTC only costs 2,000 USD, can’t I make an instant 200 USD profit?

    This process is actually widely known in Bitcoin and other markets and is known as arbitrage. If you have identical items — say apples… or Bitcoin — and it fetches a higher price in one place than another; people will simply buy and sell these assets at the same time, to profit from the difference.

    It seems simple: just buy all the apples (or Bitcoin) in the supermarket, city or country where they are cheap and sell them where they are more expensive. Soon, however, the novice trader will realise that it is a little trickier than just looking at the numbers displayed.

    In the same way that it isn’t free to send avocados from one place to another — storage, transport, upfront capital—  it’s not “free” to send currencies between multiple countries and platforms.

    The costs involved in sending money abroad could include: sending bank fees, receiving bank fees, premiums on exchange rates (which will also differ from the “Google rate”), limits the minimum or maximum amount that can be sent, time delays, price-volatility risk and fees to trade the money for Bitcoin.

    Bigbit World

    4

    Bigbit World Ltd. (BBW) provides unique services to solve Bitcoin trading difficulties. BBW trade the various digital currencies (mainly focus on Bitcoin) made available by professional brokers for their clients. They offer an opportunity to make good profits off of these existing trading products. This is a similar concept to that used in Forex trading, where traders are able to code various messages, in such a way that even when they are not around, the MT4 system picks trades base on those rules and executes accordingly.

    Everyone would love to have a system that makes them money while they sleep, travel, or are busy with other tasks, like a full-time job. At BBW, they’ve reviewed the outstanding trading performances. They also provide reliable detailed principal (overseas) withdrawal plan for clients.

    BBW official Website: www.bigbitworld.com