How do exchanges work? - page 2. | Bitcointalksearch.org

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Quote from: Jonnytrader1988 on January 18, 2024, 04:23:33 PM

My question is why is the rate higher on one exchange than on another?

Crypto trading operates on decentralized platforms, allowing users to buy or sell digital assets like Bitcoin and Ethereum. Traders use exchanges to execute transactions, leveraging market analysis tools for decision-making. Prices are determined by supply and demand dynamics, with trades recorded on a blockchain for transparency. Various strategies, including day trading and long-term investing, are employed. The market's 24/7 nature, high volatility, and technological innovations create a dynamic landscape, attracting a diverse range of participants. sorry I saw how exchange works.

Quote from: Jonnytrader1988 on January 18, 2024, 04:23:33 PM

My question is why is the rate higher on one exchange than on another?

Exchanges can have varying rates for the same currency due to factors like liquidity, demand, and platform-specific dynamics. Differences arise from disparities in supply and demand across exchanges, resulting in varying prices. Additionally, factors such as transaction fees, trading volumes, and regional market conditions contribute to rate distinctions. Traders exploit these variations through arbitrage strategies, taking advantage of price differentials between exchanges to maximize profits.

Do not take more than 10x leverage, may lost maximum trades.

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Quote from: Jonnytrader1988 on January 18, 2024, 04:23:33 PM

My question is why is the rate higher on one exchange than on another?

The reason why coin prices vary on different exchanges is that the entire trading depends on the traders. Investors arrange orders in different ways and many buy more or less coins when BUY. Not everyone buys the same amount of coins, which can lead to different prices on different exchanges depending on the order. But too high price is not too low, it is normal to be slightly too low.

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Quote from: Jonnytrader1988 on January 18, 2024, 04:23:33 PM

My question is why is the rate higher on one exchange than on another?

This is because of the instant buy sell pressure of that exchange. Sometimes a exchange can have a big buy and sell order with low liquidity, which drives the price ups and downs more than other exchanges. Actually this price difference doesn't last for long, as any arbitrage trader may find it and take the opportunity. They also sometimes exchange themselves to fill the gap to match the price of the global market. But this is normal to have a little spread in price compared to the other exchanges.

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Quote from: Jonnytrader1988 on January 18, 2024, 04:23:33 PM

My question is why is the rate higher on one exchange than on another?

When it comes to cryptocurrency exchanges, we know that there are two types of exchanges: centralized and decentralized platforms. Because the mechanics of these two, although different, can provide earnings to traders, in Cex it is the order book, while in Dex it is usually liquidity pools that, when depositing, often put money into crypto pairs.

When it comes to fees, both exchanges benefit from withdrawal fees, deposit fees, and trading fees, whether on centralized or decentralized platforms.

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Quote from: Jonnytrader1988 on January 18, 2024, 04:23:33 PM

My question is why is the rate higher on one exchange than on another?

When it comes to price then it would really be that different on which it would be considering about the activity in between sellers and buyers on that particular platform on which this is the reason on why those numbers would be different but we do know that numbers couldnt really be just that too far off when it comes to that because it would really be that a arbitrage opportunity with those traders who would really be able to snipe out with those price differences on which it would really be just that right that you should really that know on what to do or just common sense but platform wouldnt really be allowing for it to last because arbitrage could really happen.This is why its better not to bother yourself with this.

Some points to remember at least- a bit off topic.
1. Dont make exchange as your main wallet of your assets, its not something a wallet that you could possess its private keys.

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I would like to add here too something I learnt about that's different in crypto than when I did forex.

All the explanations above are very good, reasons why prices are different everywhere despite selling the same asset, true to the market forms of demand supply pricing etc.

However, I would say that a lot of "exchanges" actually don't even fall to that. There are no orderbooks, meaning, no sellers/buyers/makers/takers, but just a price based on a fixed spread between quoted buy and sell.

To illustrate, Luno calls itself the biggest crypto exchange in Philippines at one point but there is no orderbook. You simple sell crypto to them, or buy from them. There is no market making/taking. Luno doesn't even have a supply. It just takes your BTC and sells it for better price. Or other way around.

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Quote from: Jonnytrader1988 on January 18, 2024, 04:23:33 PM

My question is why is the rate higher on one exchange than on another?

Your definition of the word higher may give you a more accurate answer, as the price that appears on sites such as CMC^[1] is an average price, each platform has a specific price for Bitcoin that varies every second with trading volumes, but most of these CEXs are around this average price, and the difference is usually between 1% and 2% in The best conditions are especially for Bitcoin due to its high liquidity, but you may get different prices in:

- Buying Bitcoin from auctions: After Bitcoin is confiscated by governments, it is usually sold at a public auction. Prices are often slightly different from the price of Bitcoin according to the auction.
- Buying from OTC: These are highly regulated markets and deals in them are worth millions or even billions of dollars.
- Buying from P2P: Due to weak supply and demand, you may buy Bitcoin from a person or a P2P platform at a price that is different from the average price.

So, inside CEXs, the price may be different, but it is usually in the range of 1% and 2%, and liquidity may create some higher rates for some time, and outside CEXs, it may be different for above reasons.

[1] https://coinmarketcap.com/

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Quote from: Jonnytrader1988 on January 18, 2024, 04:23:33 PM

My question is why is the rate higher on one exchange than on another?

The trading volume on each exchange is different. and it is also influenced by demand and supply in a particular exchange.
Maybe you have heard of traders using arbitrage. they take advantage of the price difference from certain exchanges to make a profit.
This arbitrage trading situation makes it possible that there will be the same price adjustment in a short time on each exchange. I don't think the price difference that occurs on each exchange is too big. the moment may happen very quickly when pump and dump.

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Quote from: Sim_card on January 19, 2024, 03:41:29 AM

The demand and supply on exchanges make the exchange price rate differs, also they transaction fee that the exchange charge is also another factor. The market volume of the exchange, because some investors favor an exchange by keeping their assets in the exchange. It is impossible for exchanges to update their price at the same time and the price, therefore will be from the latest order on that exchange. Just as mentioned by the posters above.

If the exchange is in-demand, transaction fees might also be high. But maybe some exchange lower it because they still can earn sufficient income from the number of customers they had. And they think it attracts more people if they will lower their fees. I think that the market volume is already related to the demand and supply that you said earlier, so it may be fine if you won't say it.

But, what can I do? You already said it anyway lol. As an investor, it would be safe to keep our assets on the non-custodial wallet and not on a exchange. I don't think it's impossible for the exchange to update their pricing immediately. We are not in the 1980's anymore Cheesy

. There must be a reason for it that they only knew on why they prefer not to update it.

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Quote from: Jonnytrader1988 on January 18, 2024, 04:23:33 PM

My question is why is the rate higher on one exchange than on another?

Because different exchanges have different users and different capital from their users who are buyers and sellers. Those users will have different buying and selling orders and order sizes. Price change on each exchange will be decided by trading volume, buying and selling walls and you will not see all the same across many exchanges.

If you notice, Coinmarketcap and Coingecko will have their baskets of some exchanges and use their formulas to calculate average trading price of Bitcoin and other cryptocurrencies.

How are prices calculated on Coinmarketcap
Coingecko's Price methodology

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Quote from: tyz on January 18, 2024, 06:02:11 PM

Quote from: Jonnytrader1988 on January 18, 2024, 04:23:33 PM

My question is why is the rate higher on one exchange than on another?

The price is made by supply and demand. If demand on an exchange is greater than supply in the short term, prices can rise more sharply there than on other exchanges and vice versa. However, this is usually only the case in the short term because there are many so-called arbitrage traders who use price differences between exchanges to buy cheaper on one and sell more expensively on the other. As a result, the price usually adjusts quickly across exchanges.

He should understand that exchanges operate independently and the supply and demand in each ones determines their prices of crypto coins, and the law of basic economics applies in them, so if demand is much and supply is less in an exchange price will slightly increase and if supply is greater than demand in the same exchange price will slightly reduce. Although among exchanges price differences are not much, as you nareted, traders can buy cheaper in one exchange and sale higher in another exchange, thereby creating a near price balance.

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The demand and supply on exchanges make the exchange price rate differs, also they transaction fee that the exchange charge is also another factor. The market volume of the exchange, because some investors favor an exchange by keeping their assets in the exchange. It is impossible for exchanges to update their price at the same time and the price, therefore will be from the latest order on that exchange. Just as mentioned by the posters above.

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Quote from: mk4 on January 19, 2024, 12:34:21 AM

[...]
Note: an exchange having more "expensive" price doesn't automatically mean it's better to sell on that exchange. It will heavily depend on liquidity and market depth.

I would like to add something here, as this has already happened to me.

Even if an exchange has a better price, you should inform yourself in advance about the following points, otherwise the better price can quickly turn into the opposite:

Are there deposit fees for certain coins on the exchange?
What are the trading fees for the respective coin (e.g. it makes a difference whether you use a broker like Bitpanda or an exchange like Kraken Pro, here the difference in fees can be in the percentage range.
What are the withdrawal fees of the target coin (or FIAT) and is the withdrawal possible at all without further ado

Exchanges like to work with hidden costs, so higher prices for certain assets could also be "bait offers" for customers.

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Quote from: Jonnytrader1988 on January 18, 2024, 04:23:33 PM

My question is why is the rate higher on one exchange than on another?

It mostly depends on how many people trade on which exchange, if the volume of transactions is high then it depends on how many orders are there. When many people trade together, the price is slightly lower. Again, in the case of low or high prices, sometimes there is a role of some experienced traders.

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It totally depends on the buyers and sellers on the exchange. Bitcoin or a certain coin/token is more expensive on exchange A than on exchange B because:

1. One exchange might have better liquidity(hence better, more accurate pricing) than the other
2. Someone recently made a huge market buy(or sell) on the exchange, hence suddenly prices are more expensive(or cheaper)

Note: an exchange having more "expensive" price doesn't automatically mean it's better to sell on that exchange. It will heavily depend on liquidity and market depth.

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hi Jonnytrader1988 welcome to trading, by the way you already have what crypto exchange? maybe you can mention it, your interest seems to be in trading even when you first appeared at this time, or you are used to one exchange to build your portfolio? I don't understand and if you explain maybe you can discuss, the fact is not all exchanges are honest. It could be that a coin is higher priced than other exchanges but there is a minimum withdrawal, higher withdrawal fees and less ntwork, so fair isn't it? Cheesy

or more extreme that if a new exchange that is not very well known will make a price impact and suspend withdrawals at will, for me the coin price is more expensive on that exchange can be said to be useless.

For me, choosing an exchange that has many visitors (look at the history and agenda on Twitter in organizing events, how enthusiastic) and has feedback that does not tarnish its name is very important. It is better that the price is reasonable the difference with other favorite exchanges and not too big, even though the new exchange will certainly be more appreciated and visited, if you want arbitrage choose some of the highest 5-10 rating cex on CMC or Coingecko and for local exchanges know your risk and maybe the local council around you.

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That is normal and dynamic on this business. The rates are being done and adjusted by the demand of their traders and that's why it might be cheap on the other side and expensive on the known ones. That's because the exchange are just like the middlemen of this market.
Although for some market trades that they can do, they're the one that sets the price but still along and in line with the market price. I thought that you're going to ask on how they profit and if that's the next question on your mind then they earn from commissions each trade and as well as with the listings.

I also want to you give you some warning that if you've seen some exchange that has higher rates than the usual for selling or lower rates for buying. DYOR first, because it could be a scam exchange that will just trap your deposits. That's the reason why it's still best to rely on good and reputable exchanges, dex or cex.

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Quote from: Jonnytrader1988 on January 18, 2024, 04:23:33 PM

My question is why is the rate higher on one exchange than on another?

I've seen those ads on YouTube too claiming they'll pay like 10% over market rate or whatever. Definitely makes you go hmmm.

I mean if it sounds too good to be true, it always is right? My guess would be either straight up scam trying to lure folks in or just super low liquidity so good luck trying to actually sell at that inflated rate they claim. Either way, probably best to just steer clear and

stick with the reputable mainstream exchanges that have been around a while. May not be quite as flashy but least you know they're legit and you can cash out your coins if you need to. Gets too dicey playing around with these fly-by-night operations just trying to make a quick buck. Better safe than sorry when your hard-earned moneys on the line.

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Quote from: Jonnytrader1988 on January 18, 2024, 04:23:33 PM

My question is why is the rate higher on one exchange than on another?

This is quite simple logic. It is because there are different buy and sell orders in different exchanges' order books and different traders taking orders at the same time. You don't expect them to have the same orders being executed at the same time.

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Quote from: Jonnytrader1988 on January 18, 2024, 04:23:33 PM

My question is why is the rate higher on one exchange than on another?

If you look at the price difference on those exchanges, it's usually not much of a difference. What I mean is that you cannot see Bitcoin trading at $40k in the "A" exchange while it's trading at $43k in the "B" exchange. The difference is not just too far, and the reason has already been mentioned in the first comment.

There are different exchanges, and a lot of people around the world are using most of those exchanges, and they are setting their different buy and sell orders, so it depends on the last executed order. That's when you will see a little price difference in one exchange compared to another.

For example, if someone places an order to sell Bitcoin at $42,800 on the Binance exchange and another person places a sell order of $42,200 on MEXC, if the second order first gets excused, the price of Bitcoin on that exchange will drop to $42,200 until another order is executed too.

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