Trading bitcoins is not quite simple. The foundation here is very different. It is not backed by a company’s performance like a stock is. And much less the price of trading platform, you can’t even anticipate the price of equities! For more info regarding trading and management.
However, did you know that different exchanges have different Bitcoin values? NO? You should be aware of it right away. Here is a basic estimate of how much bitcoins are worth.
Keeping with our subject, supply and demand factors affect bitcoin pricing. There is always a finite amount of bitcoins available. The resource will run out once they are all mined. As a result, demand is the main factor influencing pricing. Additionally, increasing demand results in higher pricing when supply is constrained and vice versa.
Keep in mind how this differs from share pricing. However, when you buy a share, you essentially buy a slice of pizza from the corporation. Therefore, the position, performance, quarterly results, management, sector, and state of the economy can all impact this company’s share price.
Now that you know how much bitcoins cost let’s try to understand why prices differ between exchanges.
Why do Bitcoin prices differ between exchanges?
The value of bitcoins on various exchanges varies for several reasons, including:
Analysis of the market
Different worldwide markets have different sizes. There are large and small markets. There would, therefore, also be variations in the supply.
This is the exact reason why Indian Bitcoin pricing will be higher than those of their foreign competitors. Because even though everyone wants to buy some bitcoins, there aren’t many vendors on this market. And it is impossible to stop a price increase when demand outpaces supply.
The volume of trades has an impact on bitcoin pricing as well. And according to factors like market size, regulatory presence, etc., these volumes change. In essence, the estimations from previous transactions are averaged to calculate the worth of the bitcoin. As a result, pricing varies between exchanges as much as volumes vary.
The estimation of a bitcoin’s value is not standardised.
To reiterate, supply and demand are the only variables that impact bitcoin prices. Additionally, the prices differ between exchanges as a result of these qualities. Therefore, how much bitcoin should cost is unknown. For cryptocurrencies, there is no standard price structure worldwide. It merely bases its price on the mood of the individual markets at the time.
Charges and Taxes
Taxes, transaction costs, margins, and other costs are in addition to the base price of bitcoin. Furthermore, these charges vary from one exchange to the next. This further adds to the variety of Bitcoin prices. Price discrepancies last longer.
This section has a mediocre level of interest. So let’s investigate a little more. First, let’s try to understand this in terms of financial markets. After having a fantastic idea, you decide to sell your shares of A Ltd. on the NSE for Rs. 1001 per share and repurchase them on the BSE for Rs. 1000 per share, resulting in a gain of Rs. 10,000 right away (not considering charges).
Although this may seem very enticing in theory, it is not practical in reality. If you’re a retail investor without algorithmic capabilities, forget it because these opportunities only persist for a fraction of a millisecond.
For instance, if stock prices are high on the NSE and the big boys start to sell their holdings, the price would inevitably fall, but on the BSE, their counterparts who are buying will keep doing so, driving up the share price. As a result, the spread is narrowed, and arbitrage is stopped.
This is because moving bitcoins between exchanges carry incredibly high transaction fees, as do send and receiving bank fees, the variation in currency rates for international transactions, and the requirement of various forms of collateral.
If you’re willing to buy bitcoins, you should be aware of the prices offered on several exchanges before doing so. Please do not make your choice based only on these factors, though. It would also be ideal for considering exchange rates, transaction fees, and other factors. The exchange decision should be made after carefully evaluating the final price calculated after accounting for all relevant costs.