Cryptocurrencies have different prices depending on where they are traded. This is because they are traded on multiple platforms that are not synced with each other. The price of cryptocurrencies today, on one platform, could be pretty much different from another. This is because the traders themselves determine the price.
Also, different exchanges have different prices for a couple of reasons.
What causes a single cryptocurrency to trade at different prices?
Let us consider a specific example like Bitcoin.
It is the same way stock market works. Estimating how much something is worth can be hard. But people use different methods. Looking at what others are willing to pay is one way. For example, if everybody wants to buy Bitcoin, the price will increase because of more demand.
How come so many exchanges have different prices?
Did you ever notice how Bitcoin prices vary across exchanges? It can be confusing. Many different things influence the price of Bitcoin, so it can look different depending on the crypto exchange you are using.
● No standard pricing
Often, crypto prices differ between exchanges because of pricing inconsistencies. Fiat currencies are regulated and backed by the Federal Reserve, but cryptocurrencies are decentralized. Their value is entirely determined by the market, without any other factors.
Do you know how Bitcoin’s value has skyrocketed over the past few years? It is crazy that it rose from pennies to tens of thousands. The thing is, every exchange sets its prices without strict rules to follow. So, if they think a cryptocurrency is worth more or less than other exchanges, they can sell it at a different price. It is all about what makes sense on the market and how people feel about it. That is why some exchanges give you more or less for your Bitcoin.
● Liquidity
The liquidity of trading platforms is another major factor affecting price differences. The bigger exchanges usually have more assets, making converting cryptocurrency to cash easier or vice versa. This can affect prices because when someone sells cryptocurrency, it can influence others to buy or sell. If an exchange has many buyers and sellers, it is considered more “liquid,” and prices are less likely to change suddenly.
● Supply and Demand (Market Forces)
The two main factors that influence crypto prices are supply and demand. But it is not just the overall market situation that affects prices. Crypto exchanges also determine expenses based on what is happening on their platform. For example, if a particular exchange’s users are more interested in buying Bitcoin, then it will be more expensive on that exchange. Traders are more likely to experience this effect on exchanges with lots of activity. When demand is high, the prices on popular exchanges might be slightly higher than on smaller exchanges.
● Fees and Transaction Costs
It is impressive to realize crypto marketplaces are independent businesses with different goals and strategies. These exchanges make money by facilitating users’ transactions and charging them fees. Generally, cryptocurrency exchange fees range from 0.02% to 3.0%, greatly impacting the price.
Sometimes, when you use certain exchanges, they charge you extra fees, like gas, on top of the regular price. This can make prices go up and down. If an exchange includes gas fees in the overall price, it can be much more expensive than an exchange with a simpler fee structure. This is especially true when demand is high.
● Crypto pair-ups
Some might not show USD in their trading pairs when checking out different crypto exchange prices. Even though crypto trades often happen in two currencies, the price is usually displayed in fiat currency. So, for example, someone might buy Bitcoin with ETH, while another might use a stablecoin. These different trading pairings can affect how much Bitcoin is worth overall.
ETH prices move in sync with Bitcoin prices, just for your info. Therefore, if Bitcoin prices shoot up, ETH prices will too. If you are trading specific pairings, brace yourself for more price swings. In contrast, stable pairings like USDT and USDC help stabilize prices faster. It is worth noting that different exchanges will have different prices because of the constant fluctuations. So, look at how exchanges offer their pairings when looking at Bitcoin prices.
Conclusion
Many things affect cryptocurrency values, but buying and selling on the right exchange can fetch you the most profit. As crypto prices change, so does the media’s coverage and people’s feelings about it.