Why is the Price of Bitcoin Different Around the World?

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Why is the Price of Bitcoin Different Around the World?

At the time of writing, a Google search indicates that the price of a single bitcoin exceeds USD$13,000. While most of the recent headlines around bitcoin has focused on the incredible increases, there has been less debate on the calculation of the value itself, specifically how Google (or any other source, for that matter) estimated the worth of a bitcoin. If you search for a single bitcoin on many different cryptocurrency exchanges throughout the globe at the same time, you’re likely to see somewhat varied prices. Why does the price of bitcoin vary depending on where one looks?

No Standard Pricing

The fundamental reason for bitcoin price differences among exchanges is because, being a decentralized digital currency, there is no standard or worldwide bitcoin price at any one moment. It is not connected to the USD or any other fiat currency, nor is it tied to a certain nation or exchange. As with other commodities, supply and demand change based on the time and market, causing the price of bitcoin to fluctuate.

Average Estimate Prices

Given the lack of a worldwide standard for the price of a single bitcoin, how can investors be certain that Google, a digital currency exchange, or another price tracker is correct? The simple answer is that these prices are not guaranteed to be accurate in any way. One reason for this is because most bitcoin price trackers create an average estimate or recently traded bitcoin price based on the transaction history of a major bitcoin exchange. Google, for example, derives its data from the Coinbase API, which is why the value of bitcoin is linked to the US dollar.

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Aside from the (hopefully minor) flaws built into a price tracker or search engine when predicting the cost of a single bitcoin, investors should bear in mind that the real price of purchasing that coin on an exchange is likely to be greater. The reason for this is because most exchanges charge a transaction fee. This is usually extremely little in proportion to the price of a bitcoin, especially given how much it has risen in recent months, but it does add inconsistencies into the price that you may see advertised.

Finally, bitcoin exchanges connect individuals who want to sell bitcoin with those who want to purchase. Varied exchanges may have varying amounts of supply and demand, resulting in somewhat different prices. Of course, if the price on one exchange is much lower than on another, the supply and demand levels are likely to fluctuate even more.

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