Why don – t people buy at one exchange and sell at another? Bitcoin Stack Exchange

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Why don't people buy at one exchange and sell at another?

In other words, someone or anyone can just buy from bitstamp and sell to mtgox to make profit.

What’s stopping people from doing so? What’s the catch?

It can’t be that people aren’t aware that they could do it right?

9 Answers

Many people already do this with bitcoin. In finance, this is called arbitrage trading, or simply arbitrage, sometimes even abbreviated arb.

The reason for the price differences are fees for transferring inbetween the bitcoin exchanges (you have to transfer both, bitcoins and fiat currency for a finish cycle) and fees for trading bitcoins against fiat currencies.

Because of the arbitrage traders, who make profits as long as the price difference is big enough, the prices on different exchanges quickly adjust to be right at the border inbetween where the fees eat up the earning and where you make profits.

There is an excellent page, http://bitcoin-analytics.com , which can tell you where there presently are arbitrage oppurtunities. Simply go to the website and click on “Arbitrage”.

I’ve writen software to arbitrage on some US exchanges.

I couldn’t arbitrage without software because:

  1. It was hard to account for all fees to understand if an chance is profitable.
  2. It took a duo of minutes to evaluate opportunities (query an exchange’s order book, query another exchange’s order book, do an evaluation, execute a sell, execute a buy) and by that point the evaluation may be invalid.

Here are the factors that make it hard for me to arbitrage with software:

  1. Petite (fractions of a percent) profit margins. As pointed out earlier everyone in the loop is taking fees.
  2. Puny (seconds to minutes) profitable time windows
  3. Slow (2-8 days) cycle times to budge USD back into position for sale
  4. Large Capital requirements – since the margins are so puny for arbitrage to be worth it on an annual basis takes a lot of assets. For example I might make a few cents or dollars on a $1K sale and purchase of Bitcoin.
  5. Risk – with large capital requirements comes risk of loss. What if a trade becomes unprofitable before the arbitrage completes? What if Bitcoin tanks?

I am interested in non-US exchanges since the spreads are thicker but I expect it will increase some of the issues above, especially fiat cycle time since my base is USD

What’s stopping people from doing so? What’s the catch?

The catch is that few people have been able to get US dollars out of Mt. Gox since June 20, 2013, when Mt. Gox imposed a “hiatus” on US dollar withdrawals. Mt. Gox has a long list of excuses for not paying their debts, which you can find on their site. Some of their excuses strain credulity. This has stopped arbitrage, which normally uses the same money going round and round from exchange to exchange.

Mt. Gox is still paying out Bitcoins on request, most of the time. So people with US dollars in a Mt. Gox account are paying a premium to convert them to Bitcoins, get them off Mt. Gox, and sell them on another Bitcoin exchange. Right now, the premium is about 15%, and it’s been up to 20% shortly. It seems to be enhancing about 5% per week. This reflects the market’s collective opinion of whether funds deposited on Mt. Gox will be lost.

http://bitcoin-analytics.com has paid contraptions for tracking the spread.

One of the major reasons standing in the way of profiting from arbitrage opportunities has to do with “volume”.

The volume for either exchanges is not high enough yet to support big trades. Large profits require large trades (in arbitrage). Making $1,000 may be feasible inbetween exchanges, but that’s an extreme best case screenplay and using 10k in capital! Moving trades upwards of 100k would be just plain stupid if even possible in such a low volume market. Chances are if your arbitrage trade is big enough to profit from, it will budge the market against you.

Arbitrage in the finance world is done with millions and millions of dollars and for fractions of a 2nd. That just isn’t possible with Bitcoin.

Something I am presently looking into, and a big issue that nobody has indeed mentioned earlier is blockchain time.

1) Bitcoin is traded on a number of exchanges, however the entire process of buying on one exchange, transferring to another exchange and selling on that 2nd exchange can take on the order of magnitude of thirty minutes(

Ten minutes per block verification) if not more. With the volatility of the market, I would certainly not want to hinge a bet that the arbitrage window would still be open that long after it becomes present.

Two) There are cryptocurrencies that have shorter verification times, but very few trade on numerous exchanges, and even fewer do so on exchanges that have APIs available. Litecoin is one of the few coins that does trade fairly widely, be it still has a verification time of two and a half minutes.

I have been wondering about it myself for a long time now. I even thought of developing trading software (bot) that would automatically buy on one exchange and sell on MtGox. The price difference inbetween BTC-e and MtGox can be as high as $100/BTC The problem is how to get your cash (US$) out of MtGox? Last time I attempted, I waited – in vain – for almost five weeks and eventually created a support ticket to cancel the wire transfer, bought BTCs at the inflated price and transferred them to CoinBase to cash out. The only way I see to make some profit is this: BTC price fluctuates frantically every 2nd of every hour of every day. So 1. buy low at BTC-e (or CoinBase) or any other exchange, say you buy five BTCs for $800 each = $4K Two. Transfer to MtGox and sell for $900 each, Now you have $4500 cash sitting in your MtGox account that you cannot get out. Three. Wait until BTC price on MtGox drops to BELOW $800, BUY. Say, for example, at $750, you buy six BTCs for the $4500 you have. Four. Transfer back to the exchange you commenced at (or to CoinBase, where ACH withdrawals to US bank accounts take only forty eight hours). Now you’ve ended a round tour with one BTC profit (less transfer fees, which actually should not be more than $100 total). Five. Wait until BTC price is $800 again at this exchange (your startig point), cash-out, or repeat the process.

But. you see where the problem is. I am assuming the BTC price will sway insanely inbetween $750 and $900 in few brief days. What if it doesn’t? what if it drops in value and stays below your commencing price of $800 for a long time, or keeps losing value? But then again, it’s a risk inherit in any speculative trade. And Bitcoin trading is all speculation.

there are many similar question on Bitcoin.SE (search for “arbitrage” to read more).

I’ll attempt to resume what I understood until today on this topic (I’m fairly interested into it, mee too).

There is room to play some arbitrage buying and selling in different exchanges market, but the real problem is the speed of the transactions and keeping your dollars into all you accounts. You need to keep some dollars and some bitcoins in every market you choose to use (mtgox and few others) and buy/sell keeping an eye on the different prices. The problem is when you want to trasfer some bitcoin froma a market to another (it takes time! and some fees) and when you want transfert dollars in/out a market (it takes fees!!). You should check the transfert fees when you stir your dollars and count if it is still valuable.

Why don – t people buy at one exchange and sell at another? Bitcoin Stack Exchange

Без кейворда

Get via App Store Read this post in our app!

Why don't people buy at one exchange and sell at another?

In other words, someone or anyone can just buy from bitstamp and sell to mtgox to make profit.

What’s stopping people from doing so? What’s the catch?

It can’t be that people aren’t aware that they could do it right?

9 Answers

Many people already do this with bitcoin. In finance, this is called arbitrage trading, or simply arbitrage, sometimes even abbreviated arb.

The reason for the price differences are fees for transferring inbetween the bitcoin exchanges (you have to transfer both, bitcoins and fiat currency for a accomplish cycle) and fees for trading bitcoins against fiat currencies.

Because of the arbitrage traders, who make profits as long as the price difference is big enough, the prices on different exchanges quickly adjust to be right at the border inbetween where the fees eat up the earning and where you make profits.

There is an excellent page, http://bitcoin-analytics.com , which can tell you where there presently are arbitrage oppurtunities. Simply go to the website and click on “Arbitrage”.

I’ve writen software to arbitrage on some US exchanges.

I couldn’t arbitrage without software because:

  1. It was hard to account for all fees to understand if an chance is profitable.
  2. It took a duo of minutes to evaluate opportunities (query an exchange’s order book, query another exchange’s order book, do an evaluation, execute a sell, execute a buy) and by that point the evaluation may be invalid.

Here are the factors that make it hard for me to arbitrage with software:

  1. Petite (fractions of a percent) profit margins. As pointed out earlier everyone in the loop is taking fees.
  2. Petite (seconds to minutes) profitable time windows
  3. Slow (2-8 days) cycle times to budge USD back into position for sale
  4. Large Capital requirements – since the margins are so petite for arbitrage to be worth it on an annual basis takes a lot of assets. For example I might make a few cents or dollars on a $1K sale and purchase of Bitcoin.
  5. Risk – with large capital requirements comes risk of loss. What if a trade becomes unprofitable before the arbitrage completes? What if Bitcoin tanks?

I am interested in non-US exchanges since the spreads are fatter but I expect it will increase some of the issues above, especially fiat cycle time since my base is USD

What’s stopping people from doing so? What’s the catch?

The catch is that few people have been able to get US dollars out of Mt. Gox since June 20, 2013, when Mt. Gox imposed a “hiatus” on US dollar withdrawals. Mt. Gox has a long list of excuses for not paying their debts, which you can find on their site. Some of their excuses strain credulity. This has stopped arbitrage, which normally uses the same money going round and round from exchange to exchange.

Mt. Gox is still paying out Bitcoins on request, most of the time. So people with US dollars in a Mt. Gox account are paying a premium to convert them to Bitcoins, get them off Mt. Gox, and sell them on another Bitcoin exchange. Right now, the premium is about 15%, and it’s been up to 20% shortly. It seems to be enlargening about 5% per week. This reflects the market’s collective opinion of whether funds deposited on Mt. Gox will be lost.

http://bitcoin-analytics.com has paid devices for tracking the spread.

One of the major reasons standing in the way of profiting from arbitrage opportunities has to do with “volume”.

The volume for either exchanges is not high enough yet to support big trades. Large profits require large trades (in arbitrage). Making $1,000 may be feasible inbetween exchanges, but that’s an extreme best case screenplay and using 10k in capital! Moving trades upwards of 100k would be just plain stupid if even possible in such a low volume market. Chances are if your arbitrage trade is big enough to profit from, it will stir the market against you.

Arbitrage in the finance world is done with millions and millions of dollars and for fractions of a 2nd. That just isn’t possible with Bitcoin.

Something I am presently looking into, and a giant issue that nobody has truly mentioned earlier is blockchain time.

1) Bitcoin is traded on a number of exchanges, however the entire process of buying on one exchange, transferring to another exchange and selling on that 2nd exchange can take on the order of magnitude of thirty minutes(

Ten minutes per block verification) if not more. With the volatility of the market, I would undoubtedly not want to hinge a bet that the arbitrage window would still be open that long after it becomes present.

Two) There are cryptocurrencies that have shorter verification times, but very few trade on numerous exchanges, and even fewer do so on exchanges that have APIs available. Litecoin is one of the few coins that does trade fairly widely, be it still has a verification time of two and a half minutes.

I have been wondering about it myself for a long time now. I even thought of developing trading software (bot) that would automatically buy on one exchange and sell on MtGox. The price difference inbetween BTC-e and MtGox can be as high as $100/BTC The problem is how to get your cash (US$) out of MtGox? Last time I attempted, I waited – in vain – for almost five weeks and eventually created a support ticket to cancel the wire transfer, bought BTCs at the inflated price and transferred them to CoinBase to cash out. The only way I see to make some profit is this: BTC price fluctuates insanely every 2nd of every hour of every day. So 1. buy low at BTC-e (or CoinBase) or any other exchange, say you buy five BTCs for $800 each = $4K Two. Transfer to MtGox and sell for $900 each, Now you have $4500 cash sitting in your MtGox account that you cannot get out. Trio. Wait until BTC price on MtGox drops to BELOW $800, BUY. Say, for example, at $750, you buy six BTCs for the $4500 you have. Four. Transfer back to the exchange you embarked at (or to CoinBase, where ACH withdrawals to US bank accounts take only forty eight hours). Now you’ve ended a round journey with one BTC profit (less transfer fees, which actually should not be more than $100 total). Five. Wait until BTC price is $800 again at this exchange (your startig point), cash-out, or repeat the process.

But. you see where the problem is. I am assuming the BTC price will sway frantically inbetween $750 and $900 in few brief days. What if it doesn’t? what if it drops in value and stays below your beginning price of $800 for a long time, or keeps losing value? But then again, it’s a risk inherit in any speculative trade. And Bitcoin trading is all speculation.

there are many similar question on Bitcoin.SE (search for “arbitrage” to read more).

I’ll attempt to resume what I understood until today on this topic (I’m fairly interested into it, mee too).

There is room to play some arbitrage buying and selling in different exchanges market, but the real problem is the speed of the transactions and keeping your dollars into all you accounts. You need to keep some dollars and some bitcoins in every market you choose to use (mtgox and few others) and buy/sell keeping an eye on the different prices. The problem is when you want to trasfer some bitcoin froma a market to another (it takes time! and some fees) and when you want transfert dollars in/out a market (it takes fees!!). You should check the transfert fees when you budge your dollars and count if it is still valuable.

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