Topic: What sets the price of Bitcoin? (Read 195 times)

I would like to add that this is one of the most important causes of currency fluctuation, and the greater the difference between prices on platforms, the higher the price, just as it happened in 2017.
The lower liquidity, the more manipulation will lead to the ability of a few individuals to control the price and thus impose the appropriate price for them.
Once the market capacity reaches sufficient limits, everyone will be forced to adhere to specific prices and little fluctuations.

Just want to add another point for this. If such thing happens (either one exchange is overpriced or underpriced), then some traders will use that opportunity to buy/sell their Bitcoins to get some profits. After that, if the liquidity is enough, the price will eventually come back to the market price (same as other markets).

Most traders won't use an exchange with very small liquidity. So even if that arbitrage opportunity exists, the risk would be greater than the benefits, and the exchange will eventually cease to exist.

Exchanges don't purchase any Bitcoin, they manage it as the middleman for the transactions. Imagine a convenience store, you buy something, the cashier is the middleman, and the product is given to you through the purchase you made to the middle man by paying it. Literally anyone who has any amount of crypto could be the person whom provides the exchange with the volume of coins they show to their users.

No they don't. Their just like any other trader here, where they sell their BTC close to the set price of the market, or larger if they are willing to wait anyway. They can be called the source of BTC, but they don't set the price. In the first release of BTC, sure it could be said so, but it's been 10 years, BTC market has a lot of it flowing through the exchanges already.

They don't synch it. If someone lowers their selling price, the overall average of the price of the coin lowers, but that only stays for a moment since I mean, who would do that right? Exchanges right now don't differ much in terms of price and even if they do, it's because of the amount of volume of coins that are being traded in their respective exchanges.

There are multiple types of exchanges.

The biggest exchanges are simply platforms to connect users. They don't store anything. Some users will put some asking prices. If the prices are unrealistically big, they will not sell, because others will sell on smaller prices. Some other users will want to buy. If they offer too low prices, nobody will want to sell to them, since others will want to buy at higher prices. When seller and buyer prices match, the sale is done and the platform will get a small fee.

On these exchanges you can also sell/buy "instantly". In that case you'll match the highest buyer's price or the lowest seller's price plus the platform fee.

There are also exchanges where you can "trade" directly with the exchange, not other people. They have bigger fees and how they work is their business. They keep a stash, but I think that most have it small and have some money waiting on some of the biggest exchanges and when you initiate a trade, their bots will also make a similar trade on the "normal exchanges" to replenish the stash.


Any trader tries to sell.buy at a price - bigger or smaller. They don't necessarily trade at the current spot price, they may wait the price rise (if they sell) or fall (if they buy). Maybe you should read about limit sell and stop loss.
I said traders. Not only miners trade.


The price is determined as I wrote, by the buyers and sellers expectations.
Also there are plenty of trading bots, some are arbitrage bots which will "equalize" the price between exchanges as soon as one has much different price than the others (by buying from one and selling to another).

Exchanges don't need to purchase or sell BTC in their exchange. It's you, me & other people who want to buy sell bitcoin.

Price isn't set by any single party, it's the same as I mentioned above; the traders. Imagine, I want to sell BTC @ $8000, if someone places an order of buying BTC @ $7600, the current price will be @ $7600

Again, it's the trader who determine the price; see 2nd quote. For your info, price in all exchanges are never same & it's because of the market participants. For instances, I use Binance. I may place a buy order @ $7500- the price in Binance will be $7500, while in Bittrex, another buyer may place an order @ $7800- the price in Bittrex will be $7800; people sometimes take this advantage- it's called arbitrage trading. Buying lower in an exchange & selling in another exchange for higher price.

In the below image, all the green prices are bid price. The highest one will be counted as the current price.
Binance Price- $7505


Bittrex Price- $7500


Take this market same as stock market. Traders (buyers & sellers are the price determiner).

Merry Christmas

But in my noob understanding, market makers are the real ones who set the price of Bitcoin.

*Read here: https://www.match-trade.com/role-market-makers-cryptocurrency-exchanges/

I get market forces, supply and demand etc, but I'm thinking more at a practical level here.

Correct my n00b understanding if it is wrong, but there is a single distributed ledger (Blockchain) which is the Bitcoin implementation. There are nodes which maintain this network and miners which process the transactions. Then there are exchanges which allow you and I to purchase Bitcoin mined on the platform from, I assume, the miners. So at a practical level is is a case that:

• The exchanges purchase a bulk lots of Bitcoin that they can sell on there exchange, or do they have a list of traders/wallets willing to sell that they transact with when I click the buy button?
• Do the miners somehow set a 'reserve' price at which they are willing to sell, or is the price of one BitCoin defined somewhere else by someone else?
• How do the various exchanges determine the price? Whats to stop one exchange selling at $5000 and another for $3000? How do they synchronise their pricing and why do they differ slightly?

Thanks, and merry Christmas to all