For sure, many fans of cryptocurrencies have heard about such a way of earning money as arbitrage on exchanges and exchangers. The essence of earnings comes down to playing on the difference in the exchange rate. But, many do not know why that course is different everywhere and what affects it. We will talk about these processes later, considering a specific example with the bitcoin exchange rate on different cryptocurrency exchanges.
How is the price formed?
The current bitcoin exchange rate on any exchange is determined by the last purchase and sale transaction, i.e., how much the buyer or seller gave for the coin. As soon as the next transaction is made, the exchange rate changes. Thus, the parties to the transaction find the optimal value of the coin that suits them and sell (or buy) bitcoin.
Cryptocurrency differs from fiat in that it does not have an official regulator in the form of a Central bank and other financial organizations, so the bitcoin exchange rate is volatile and constantly changing. This is the main advantage of bitcoin, because banks often artificially underestimate or inflate the exchange rate themselves.
What else affects the bitcoin exchange rate?
In addition to the last completed transaction, other equally important factors affect the bitcoin exchange rate. For example, experts have noticed that most traders involved in arbitrage are guided by the exchange rate of cryptocurrencies in major exchanges before making a transaction.
Also, the bitcoin exchange rate on different exchanges is affected by the current demand and the intensity of trading. The larger and more popular the exchange, the more dynamically the value of different coins changes. In different regions, the demand for cryptocurrency is also different, hence the answer to our main question - why is the bitcoin exchange rate different on different exchanges?
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