Why Crypto Exchanges Have Different Prices

Traders who use one crypto exchange might not be aware that the prices for their preferred digital assets will be different on another exchange. To get the best, it’s important to understand how the mechanics behind this works.

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Key Takeaways:

• Decentralized crypto exchanges are not governed or regulated by third parties and can set their own prices.
• Larger crypto exchanges with significant trading volumes, liquidity, and lower fees typically have more consistent prices than lesser-known or newer exchanges.
• Using a price aggregator is a good way to sanity-check the price of a given crypto asset since they present averages in real-time.

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How Crypto Exchanges Set Their Prices

Crypto exchanges set prices by considering supply and demand dynamics and arbitrage opportunities since those are the main factors. Each exchange functions as a platform where buyers and sellers place orders. A trade occurs when a buyer's bid aligns with a seller's ask price, setting the asset's market price on that exchange.

Although cryptocurrencies are not regulated like fiat currencies, trading platforms look at external aspects such as trading activity, market depth, and price fluctuations on other exchanges. This interconnected structure helps maintain price consistency in the overall crypto market and upholds a degree of stability. 

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5 Reasons Why Prices Differ Between Crypto Exchanges

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1. Lack of standard pricing 

Unlike fiat currencies, digital currencies are not regulated by any central body, so their prices are not standardized. Likewise, due to the decentralized nature of crypto, each crypto exchange operates independently, leading to price variations. While many factors push prices to be generally in line with each other, there is no third party that instructs crypto exchanges to set certain prices.

This ultimately leads to fragmentation in the overall crypto market, where exchanges have their own trading volumes, liquidity, and pricing mechanisms. As a result, price discrepancies can arise, particularly for less widely recognized cryptocurrencies.

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2. Liquidity is different from exchange to exchange

Liquidity refers to how easily an asset can be bought or sold without affecting its price. Exchanges with higher liquidity generally have more stable and competitive prices because there are enough buyers and sellers to meet each other’s demands. Therefore, transactions can be made relatively straightforwardly.

In contrast, prices can be more volatile on exchanges with lower liquidity and differ significantly from other exchanges. For instance, a highly liquid exchange like Binance might offer Bitcoin slightly different prices than a smaller, less liquid exchange.

For example, high-liquidity crypto exchanges include Binance, Kraken, and Bybit. According to CoinMarketCap, their liquidity scores were 869, 754, and 607, respectively. The spreads on these exchanges would be narrower than those of a lesser-known or newer exchange.  

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3. Transaction costs and fees

Crypto exchange users incur trading fees whenever a transaction is made. The presence of these fees can impact the prices displayed on exchanges. Elevated fees could cause prices to rise to account for these additional expenses, whereas lower fees may lead to more competitive pricing.

In other words, traders might be reluctant to pay the extra Bitcoin transaction cost and might look for different ways to move their liquidity to another exchange and lower their crypto fees.

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4. Higher trading volumes mitigate price swings

The trading volume for a given crypto asset will differ from exchange to exchange, and it plays a major role in current prices. Larger trading volumes typically result in more consistent prices, as there are ample transactions to mitigate significant price fluctuations. Transactions made by whales are diluted to an extent on larger exchanges, but the effects will be more easily seen on exchanges with smaller trading volumes for the given asset.

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5. Supply and demand

The fundamental economic concept of supply and demand significantly impacts crypto exchange prices. When there is an increase in demand for a cryptocurrency, its price tends to go up. Conversely, if the supply of a cryptocurrency surpasses the demand, its price will likely decrease.

Factors such as news events, technological progress, and market sentiment can result in abrupt changes in supply and demand that traders need to be aware of. For instance, favorable news about Bitcoin adoption, like its ETF, can trigger a surge in exchange demand and price.

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How to Spot Different Crypto Prices on Different Exchanges

Traders can use several tools and strategies to navigate the varying prices across exchanges.

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Use price aggregators

Price aggregators, such as CoinMarketCap or CoinGecko, gather prices from various exchanges and present either an average or the most favorable available price. Utilizing these platforms is an easy way for traders to quickly assess the current market price for a given digital asset and pinpoint which exchanges may have disparities.

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Monitoring prices in real-time

Platforms such as TradingView or CryptoCompare monitor prices on various exchanges in real-time. These tools can notify traders of important price fluctuations and assist them in making better-informed trading choices.

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Start your own exchange and set your own prices

Like other platforms with their own coin prices, you can start an exchange, aid in crypto price discovery, and generate income by running your own customizable crypto exchange with HollaEx®.

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We aim to publish factual and accurate information as of the publication date. For specific information about a cryptocurrency exchange or trading platform please visit that provider's website. This information is general in nature and is for educational purposes only. We do not provide financial advice, nor does it take into account your personal financial situation. We encourage you to seek financial advice from an independent financial advisor where appropriate and make your own inquiries.

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List your own coins on your own exchange with HollaEx®. Price your crypto coins and more using out white-label exchange software.