<p>If I could buy a bitcoin on Exchange A for $2,000, turn around and immediately sell it on Exchange B for $2,500, and make an immediate profit of $500, I would do that all day long, and get rich!</p>

<p>But if even a small price discrepancy exists between two exchanges, many people will find it, and start buying on one/selling on the other. </p>

<p>All that one-sided buying in one market and selling in the other market moves the price back to equilibrium.</p>

CC BY-SA 3.0
2017-07-04T16:26:38.403Z
There's also a human/psychological factor to consider, if BTC on ExchangeA is $2500, and on _my_ exchange it's $2400, I'd be tempted to buy as I expect the price is going up, adding to it's rise.  Likewise, if the price is lower elsewhere, I may be tempted to sell and re-buy lower driving the price down.
Daniel Morritt
CC BY-SA 3.0
2017-07-04T17:08:00.343Z
so theres no central index, just market forces?
s_p
CC BY-SA 3.0
2017-07-05T11:19:46.333Z
@tq Correct!  Nobody is around to set any "monetary policy", or decide to mint new coins, or make loans that don't actually exist. It's purely down to market forces, if people give bitcoin more value or the demand outstrips supply, it goes up, if they think it's overpriced or there's a surplus, it goes down.
Daniel Morritt
CC BY-SA 3.0
2017-07-24T22:06:54.937Z
@DanielMorritt: It is interesting to note that the price is set purely on each market's "say-so".  If a market claims that coins go for $3,500, there is no way to verify that.  In theory, it would be really interesting to see a double-sided blockchain where cash and BTC are both recorded, and the actual price of each BTC transaction is publicly recorded.
abelenky
CC BY-SA 3.0
2017-07-04T14:38:13.390Z
2017-07-04T14:38:13.390Z
abelenky
<p>I know there are price difference across all exchanges but they are relatively similar.  If each exchange operated independently I would think the price of coins would be radically different since the liquidity and exchange pattern would have nothing to do with each other.  Are exchanges tied to a central index?  How do they keep a somewhat "consistent" price?  </p>

CC BY-SA 3.0
2017-07-04T14:31:36.073Z
https://en.wikipedia.org/wiki/Law_of_one_price
Nate Eldredge
CC BY-SA 3.0
2017-07-04T14:42:47.827Z
For reasons why this might *not* happen, see https://bitcoin.stackexchange.com/questions/9626/why-do-the-price-of-bitcoins-vary-wildly-between-exchanges, https://bitcoin.stackexchange.com/questions/9015/is-anyone-taking-advantage-of-different-prices-across-exchanges
Nate Eldredge
CC BY-SA 3.0
2017-07-04T16:57:28.700Z
thank you for the posts, I was wondering how exchanges overcome arbitrage.
s_p
CC BY-SA 4.0
2024-07-16T16:26:46.927Z
the 3rd party I was unaware of were Market Makers
s_p
<exchanges><exchange-rate><price-volatility>
How do exchanges keep relatively similar price on coins?
s_p
# How do exchanges keep relatively similar price on coins?

(Asked by: username_0 on 2017-07-04)

I know there are price difference across all exchanges but they are relatively similar. If each exchange operated independently I would think the price of coins would be radically different since the liquidity and exchange pattern would have nothing to do with each other. Are exchanges tied to a central index? How do they keep a somewhat "consistent" price?

**Tags:** exchanges, exchange-rate, price-volatility

> **Comments:**
> **username_1**: https://en.wikipedia.org/wiki/Law_of_one_price  
> **username_1**: For reasons why this might *not* happen, see https://bitcoin.stackexchange.com/questions/9626/why-do-the-price-of-bitcoins-vary-wildly-between-exchanges, https://bitcoin.stackexchange.com/questions/9015/is-anyone-taking-advantage-of-different-prices-across-exchanges  
> **username_0**: thank you for the posts, I was wondering how exchanges overcome arbitrage.  
> **username_0**: the 3rd party I was unaware of were Market Makers  

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## 1 answers

### Answer by username_2 on 2017-07-04. Score: 5

If I could buy a bitcoin on Exchange A for $2,000, turn around and immediately sell it on Exchange B for $2,500, and make an immediate profit of $500, I would do that all day long, and get rich!

But if even a small price discrepancy exists between two exchanges, many people will find it, and start buying on one/selling on the other.

All that one-sided buying in one market and selling in the other market moves the price back to equilibrium.

> **Comments:**
> **username_3**: There's also a human/psychological factor to consider, if BTC on ExchangeA is $2500, and on _my_ exchange it's $2400, I'd be tempted to buy as I expect the price is going up, adding to it's rise.  Likewise, if the price is lower elsewhere, I may be tempted to sell and re-buy lower driving the price down.  
> **username_0**: so theres no central index, just market forces?  
> **username_3**: @tq Correct!  Nobody is around to set any "monetary policy", or decide to mint new coins, or make loans that don't actually exist. It's purely down to market forces, if people give bitcoin more value or the demand outstrips supply, it goes up, if they think it's overpriced or there's a surplus, it goes down.  
> **username_2**: @DanielMorritt: It is interesting to note that the price is set purely on each market's "say-so".  If a market claims that coins go for $3,500, there is no way to verify that.  In theory, it would be really interesting to see a double-sided blockchain where cash and BTC are both recorded, and the actual price of each BTC transaction is publicly recorded.  

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