Comment by lsc | Hacker News Reader

Comment by lsc | Hacker News Reader

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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?)

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 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.

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.)

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.

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