Why do bitcoin exchanges quote different prices?

btchexchanges24 Nov 2013 / Washington Post – Here at The Switch, we love it when our writing sparks a new idea or raises a new question. So that’s why, every weekend, we pull together some of the week’s most thoughtful comments in one place.

Friday, my colleague Timothy Lee reported on a massive bitcoin transaction amounting to $150 million. That prompted our reader Frazil to ask why bitcoin exchanges often offer varying price quotes.

Here’s what I don’t get. There seems to be a large difference between bitcoin prices on the various markets For example at Mt. Gox bit coins are currently trading at $724.80 per bitcoin, while at bitstamp its $846.00 per bitcoin. That seems to be unbelievably huge arbitrage opportunity. If fact too big to be true. What am missing.

Michael Frank replied:

That price difference persists because it is extremely difficult to actually do the arbitrage, since Mt. Gox’s banking relationships in the U.S. were terminated by the Feds, so it’s difficult to get US dollars out of Gox and into the US. To do this you would probably have to shuttle the funds around through Japanese banks and/or by way of other intermediate currencies. This process is expensive (the banks will take a cut at each step) and so that’s why the price difference persists.

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