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Comment by sixQuarks | Hacker News Reader

why are there all different prices? which one is correct?

This is actually... an interesting question, though badly put. The naive answer is that a 'correct' price is what someone else will pay for your good, and different people in different markets are willing to pay different prices.

The thing is, the prices at which trades are executed on different exchanges vary by more than 10%, and as far as I can tell, there's nothing stopping a single actor from participating on all exchanges at once.

Now, if the difference between the odds one bookie is offering on next week's met's games and another bookie is greater than the vig, someone is going to come in and arbitrage it.

at this moment

MT.GOX 954.00

BTC-E 858.21

Now, I'm pretty sure that none of the bitcoin exchanges take a 10% cut, so what's going on here? how come nobody is buying on the lower priced exchange and selling on the higher priced exchange? (or rather, how come that behavior hasn't resulted in fairly even prices across exchanges?)

It is difficult to withdraw USD from MtGox. There are large fees for bank transfers and it can take weeks for mtgox to process. For this reason, there are fewer sellers on MtGox which means the price is inflated.

Because it's hard to get cash out of Mtgox and the price reflects that fact (few people cash out dollars on Mtgox, but I think more trading goes on).

That's also the reason you can't just buy low and sell high, the cash out time is 2 weeks, and a lot can happen in 2 weeks.

It is EXTREMELY difficult to get money into BTC-E. You have to go through multiple currency exchangers which each take a cut of the action. It takes a lot of time and is annoying as hell.

There were a number of answers, but if you actually work out the math, outside of big jumps where one exchange may be moving too fast for people doing arbitrage, with all the fees and transfer costs, the prices work out to be about the same. So, BTC-E has a 1% fee, plus whatever cost it took you to do the International Wire Transfer (say $35 bucks). That already gets you to ~$900. So, you get into Gox and sell. Well, that's 2200 JPY, you have to pay for the wire, $920, plus your bank probably charges you $20 for receiving a wire, $940... and that's before the 4 weeks+ it takes for Gox to get you your money + the trading fees. It may look like there's room for arbitrage but the price differences, for the most part, do take all costs into effect.

(PS Yes, I know the wire transfer fees can be lowered in terms of percentage of the cost by transferring more money at once; it's just a simple illustrative example.)

The exchanges are illiquid as all hell, so arbitrage carries a lot of risk. Bitcoin is a nice demonstration that market efficiency isn't magic, but has underlying rational-actor mechanisms that will break down in exceptional circumstances.

There's no "correct" price. The price is dependent on exchange - it's a supply and demand aspect. All the exchanges do is reflect what the latest transactions respectively.

You could buy bitcoins in a private transaction for any price.

There is obviously some potential for arbitrage here but it's probably risky given the volatile nature right now.

As I understand it, exchanges where it's hard to get your money out as USD (e.g. Mt. Gox) have high USD exchange rates, whereas places where it's easier (e.g. BTC-E) have lower rates.

In theory if the exchanges were all equivalent in this regard then the rates would pretty quickly stabilize, because people would use USD to buy BTC low on BTC-E, send it (as BTC / for almost free) to Mt. Gox, then sell the BTC high on Mt. Gox for way more USD, and repeat and profit until the rates converge. (see "arbitrage") But it's not easy to get USD out of Mt. Gox last I checked, so that doesn't seem to happen.

Each exchange's price is correct - it's just price variation based on multiple factors, similar to how a can of coke can be priced differently in various shops. E.g. if you intend to trade with MtGox, their price is the one you should be concerned with. Virtual currencies are still a relatively minor market so there's more discrepancy between exchanges compared to, say, mainstream currency or stock trading.

"Which one is correct" is a philosophically hilarious notion!

but, the prices are different primarily because of cost (in terms of fees for wire transfers and third parties) of getting money in and out of the exchange, ease of doing so (gox is pretty cheap but is taking like 30+ days to get paid), and just access (much harder for chinese to be on gox than btcchina and china also has strict capital control laws that bitcoin seems to be an easy loophole around).

Similar to why cocaine is cheaper in colombia (or miami) than NYC or bumfuck kentucky.

http://realtimebitcoin.info shows a weighted average from the 3 largest exchanges

https://cointhink.com/arbitrage/btcusd charts mtgox/btce/bitstamp and calculates the amount of arbitrage between the exchanges. It uses the orderbooks of each exchange to tally the amount available for arbitrage.

The one you can get.

Different exchanges trade at different rates.

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