Written by Aubrey Hansen
As someone who writes about bitcoin, cryptocurrency and blockchain a lot, I find myself being asked a lot of questions by family and friends who are curious about this relatively new phenomenon.
One question which creeps up time and time again is why bitcoin prices are different across various exchanges? When someone googles the price of bitcoin, it will give a figure that is different to that found on many platforms. It’s a good question, and there are several factors at play as to why this is the case.
The first, and most prominent reason, in my opinion, is the distinct lack of any standard pricing.
Bitcoin, and cryptocurrencies in general, are decentralized digital currencies, meaning there is no recognized standard price at any particular time. Crypto isn’t pegged to any fiat currency, such as the USD or Euro, and it isn’t linked to a particular nation or even to any specific exchange. Those looking to buy or sell crypto such as bitcoin will find that, as is the case with all commodities, supply and demand varies depending on the market, and the time you decide to take action.
Another factor to consider is liquidity.
We find that bitcoin trading volume can be much higher on the larger exchanges, such as Binance and BitForex, while smaller exchanges see less volume. This difference in supply affects the price of cryptocurrency across those exchanges. There is also no currently established procedure for pricing bitcoin, or cryptocurrency in general. This means that no one really knows what the cost of it should be, and the price is purely determined by trading levels at any given time.
When you look up the price of bitcoin on Google, how can you be entirely sure that the results are accurate? The truth is, you can’t be. Crypto price trackers either calculate an average estimate, or they will base their pricing on a recent bitcoin trade on a prominent crypto exchange. When you google the price of bitcoin, for example, you are provided with the value from Coinbase API.
Finally, you also have to factor in fees.
Most crypto exchanges will charge those who use their service some form of transaction fee, which will add an extra layer of inaccuracy to your final trading price. The fee charged by most crypto exchanges is relatively small in comparison to the value of your trade, but you should always read the small print and carry out your due diligence when it comes to choosing which exchange to carry out your transaction.
The average fee charged by the more popular exchanges usually ranges anywhere from 0.1 percent to 0.2 percent, but if you do your homework, you can find good deals out there.
Briefly, this means that anyone who adds liquidity to their order book by placing a limit order below the ticker price when buying, or above the ticker price when selling is eligible to pay a “maker” fee, while those who remove liquidity from their order book by placing an order that is executed against an order on the order book will pay a “taker” fee.
BitForex charge a 0 percent maker fee rate, and a 0.05 percent taker fee. The idea of “maker” and “taker” fees can be confusing for those traders relatively new to the industry, but there are certain exchanges which offer deals on fees.
ETERBASE, for example, offer zero fees for both market makers and takers subject to conditions, and there are other deals to be had depending on the amount you’re looking to trade, and how often, while Coinbase Pro, formerly known as GDAX, is considered one of the cheapest exchanges if you’re looking to buy crypto with fiat currency.
The best advice for traders who are confused about the different prices offered by different exchanges is to first clarify for yourself what kind of trader you’re going to be and look for an exchange that will cater to your needs.