Topic: Why are the exchanges so intertwined? - page 2. (Read 2699 times)

Just simply Greed and Fear combined with supply and demand. 
Seriously, at the core, some things really are that clear and easy.

thats so high school level education...

you migt aswell also say that sex is just about a penis entering th vagina.. just liek they teach in high school..

what you forget is the psychology part
bitcoin: greed, smart investment, belief to safeguard against fiat failure
sex: attraction, desire, lust, love

you forget about the usefulness part
bitoin: faster than wire transfer, irreversible, deflationary, rare
sex: fun, procreation, help hormone control

sex is not simply about boy demand a girls vagina. and girl supplies it..
bitcoin is not simply about investor demands coin. and miners supplies it..

i truly hate sheeple that only graze on the green grass provided to them and not try to dig their own paths into different fields of input to ingest

Just simple supply and demand.

And that is how it is done!

arbittrage is only 10% at play.. its more 90% sheeple panic

as proven by the china spike, where trying to move american dollar to chinese exchanges and chinese yuan to american exchanges is not a fast process..

and also proven by the mtgox saga, where mtgox closed its banks and was crashing below the $650 price of other exchanges in spring 2014 (down to $100) and other exchanges began following it down. (well untill a group of people were literally copying and pasting in all trollchats and irc's to 'wake up and not follow gox as its separate and closed off')

If someone already has both fiat and BTC at two exchanges then they can potentially buy BTC on one exchange and sell it on another without needing to transfer bitcoin from exchange to exchange. 

Yes it can be can arbitrage:
Someone with deep enough pockets (and a tolerance for risk) can have a good sized amount of BTC and cash on several different exchanges. That way you do not always have to wait for the BTC to transfer, and (in this case) none of the exchanges need to allow 'going short' on BTC.

If the exchange with higher price allow shorting btc, you can buy on exchange with lower price and then simultaneously short the same amount to lock in the price.

Then transfer the btc from exchange with lower price and close the entire position after bitcoin arrived.

This is how open and free markets work.

If you have bitcoins to sell, where are you going to sell them?  Will you choose to sell them at the exchange that is paying you the most for your bitcoins, or the exchange that is paying you the least?  Clearly, anyone with a financial incentive is going to choose to sell at the exchange that will get them the most.  This increases the supply at that exchange.

The result of an increased supply without an equivalent increase in demand is a falling exchange rate.

If you want to buy bitcoins, where are you going to buy them?  Will you choose to buy them at the exchange that is getting you to most bitcoins for your money, or the exchange that is getting you the least bitcoins?  Clearly anyone with a financial incentive is going to choose to buy at the exchange that will get them the most.  This increases the demand at that exchange.

The result of  an increased demand without an equivalent increase in supply is a rising exchange rate.

Eventually the exchange rates reach an equilibrium where the costs and conveniences associated with each exchange determine how much higher or lower they all are from each other.  Occasionally, due to variations in the volume of transactions, the exchanges may drift apart a bit in exchange rate, but eventually market forces bring them back in line with each other.

It takes long to transfer BTC. These changes happen very quickly so it can't be arbitrage . Sometimes there is always a gap in prices. E.g. There was a time when Bitfinex was always higher than Bitstamp by a few dollars. If arbitrage was the answer then why that gap?

arbitrage - people make profit via the different exchange spreads, bigger gap = bigger profit so gaps close quick.

If the price changes on an exchange then the change is seen very quickly on other exchanges? Why is this? Do the exchanges ensure this or the users? Or is it bots which access many exchanges at once?

I can't see users reacting so quickly to a price changes and actually implementing those changes on other exchanges.