Identifying the Reasons behind Different Prices of Bitcoin across Different Exchanges
“Many of you might have encountered the difference in price of Bitcoin across different exchanges around the world. This difference in price is not a malfunction, but there are several reasons that account for this price difference and in this article we are going to identify and explore them”.
How is the Price of a Bitcoin Determined
As Bitcoin or any other cryptocurrency is not backed by any real world asset, their price solely depends upon the demand and supply and nothing else. As Bitcoin has a limited supply of 21 Million coins, the more the demand, the more will be the price of each coin. In the case of Bitcoin this demand is simply derived by the sentiments of the investors unlike the performance of a company backing its share price.
The Reasons of Price Difference
The Market Size
As the market size varies across the globe, so does the supply. As the demand remains constant among the investors, the supply of Bitcoin in each market is different. Thus lesser the supply more the price and vice versa. The market size is one of the major factors that impacts this difference in price.
Trading Volume of Exchange
The trading volume is another reason that can affect the price of Bitcoin on an exchange. As the value of the Bitcoin is calculated as an average estimate of the previous transactions, the higher the difference in trading volume across the exchanges, the higher the difference in price.
Lack of Global Standard for Pricing
There exists no global standard as far as the price of BTC is concerned. The factors discussed above vary across markets and exchanges and so does the price. No one across the globe knows what Bitcoin is supposed to cost. Thus the price is derived solely on the basis of the sentiment in different markets and thus different prices.
Fees and Taxes
This is another reason for the difference in price of Bitcoin across different exchanges. Different exchanges have different fee structures and thus higher the fees, higher will be the price of BTC on an exchange. Also, the taxes are levied by different governments differently and thus have an impact on the price of Bitcoin in different exchanges across the globe.
Takeaways
- The price of Bitcoin or other currencies differs across crypto exchanges.
- The difference in price is due to many reasons including market size, trading volume, fee and taxes and lack of global standard for pricing cryptocurrencies.
Disclaimer: The article is meant for the educational purpose only and in no way it should be considered as financial advice. Own research on the topic is advisable.
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