Why Do Crypto Exchanges Have Different Prices?

TL;DR

• Crypto exchanges have different prices for cryptocurrencies due to liquidity, transaction fees, regulations, and order book differences.
  
• With varying prices on different exchanges come arbitrage opportunities. That is, buying low on one exchange and selling high on another. This requires expertise and automation tools to account for fees and market volatility.
  
• Rubic is a DEX and bridge aggregator that enables you to find the best rates across 220+ exchanges and bridges, helping you maximize your profits.

How can different exchanges have different prices for the same cryptocurrencies? This is one question that troubles most people, but it is a common phenomenon. For some people, it might offer a great opportunity for arbitrage; on the contrary, new traders may lose out on potential profits due to price differences across platforms. But what exactly is the reason behind the variation? This crypto price difference between exchanges comes from each exchange’s unique environment, such as its liquidity, user base, fee structure, and even geographical factors. The moment you understand how different factors influence the price of a cryptocurrency, you will get your answer. So let’s dive deep into it.

Why Do Prices Differ Across Crypto Exchanges?

Several factors contribute to the price variations you see across crypto exchanges. Here are some of the major reasons for creating the discrepancies:

Liquidity & Order Book Depth

Imagine a market where only one person is selling a given asset versus 100 people selling the same asset. The market with only one person selling means you have to buy it at the price that person sets, whereas the market with 100 people implies a greater likelihood of getting to buy at varying price levels. As such, the more buyers and sellers present (represented by total liquidity), the more stable prices tend to be. Conversely, exchanges with lower liquidity (fewer buyers and sellers) can experience severe price swings due to fewer participants influencing the market. Even a single large buy or sell order can shift the price dramatically. Keep in mind, this analogy is for centralized marketplaces. In decentralized markets (on DEXs), you are trading through a liquidity pool, in which the price is determined by the ratio of supply of the two tokens in the pool. Learn more about liquidity pools here.

Trading Volume and User Base

Trading volume is closely related to liquidity. High trading volume and a large user base mean deep liquidity. It eventually correlates with more consistent prices of different cryptocurrencies listed on the platform. Large exchanges (often driven by millions of users worldwide) can absorb big trades without any significant price impact. On these platforms, even “whale” orders get diluted, so price moves are gradual. However, if an exchange has low volume for a given crypto pair, then big orders or news events can push prices up or down sharply. In effect, the same coin can fetch a higher price on an exchange with a concentrated buying rush, and a lower price on one where few people are trading it.

Pair Listings and Quote Currency (USD vs USDT)

Another factor of the crypto price difference between exchanges is the choice of trading pair and quote currency. For example, some exchanges quote BTC in USD (fiat dollars), while others quote it in a stablecoin like USDT. If USDT ever drifts slightly from a 1:1 peg with the dollar, the quoted BTC prices can diverge by a tiny amount. Similarly, exchanges may list different quote currencies altogether (e.g., BTC/EUR vs BTC/USDT). Even for stablecoin pairs, small differences in how each exchange implements those quotes can cause a few cents or dollars of variance. Thus, a BTC/USDT price on one exchange might not line up exactly with a BTC/USD price on another, contributing to the differences. However, it also brings a good crypto arbitrage opportunity. 

Latency and Data Syncing

Latency (data transmission delay) and how often exchanges update their prices can also create temporary disparities. Exchanges in different parts of the world have to sync data across networks, and there is always a small delay. For instance, data from an Asian exchange might take over 200 milliseconds to reach traders in Europe or America. In high-frequency trading, that delay matters. If an arbitrage bot waits even a fraction of a second too long, it might execute on an outdated price. This means that at any instant, one platform’s displayed price might be slightly behind another’s, resulting in a fleeting arbitrage window.

Fees, Spreads, and Hidden Costs

Every exchange charges fees for buying and selling crypto. These fees can vary significantly, impacting the final price users pay. An exchange with lower trading fees might offer a slightly lower price for Bitcoin compared to one with higher fees. This means if you compare the raw price of BTC on two exchanges without accounting for fees, it might look like a disparity. But once fees are included, the net cost aligns. Moreover, some venues have wider bid-ask spreads (the gap between the highest bid and lowest ask) due to lower liquidity or risk. An exchange with thin order books might have a $20 spread on BTC/USD, whereas a big venue might only have $5. These hidden costs and spreads contribute to crypto exchange price comparison variations.

Geographical and Regulatory Differences

Crypto regulations differ across countries. Some exchanges might operate in regions with stricter regulations, influencing how they price crypto assets. Additionally, geographic location can play a role. If there’s a surge in demand for a specific cryptocurrency in a particular region, the price might be higher on exchanges serving that area. In times of peak demand, prices for Bitcoin and Ethereum have varied significantly across the world as there are limited capacities to access these cryptocurrencies.

Real-Time Price Comparison Example

While writing this article, the prices of Bitcoin are different on three of the prominent exchanges in the world, Binance and BitMEX. On Binance, the price of BTC is 113966 USDT. On the other hand, the price of BTC on BitMEX is 113897 USDT. This clearly shows the crypto price difference between exchanges. There could be multiple reasons behind the difference in price, which we have discussed earlier, such as bid and ask spread, trading volume, the size of the user base, latency, and data syncing. In this case, traders can purchase BTC on BitMEX at 113897 USDT and sell it on Binance at 113966 USDT. It is also essential to consider other factors, including platform fees, withdrawal fees, the capital deployed, and the time required to complete the process, for practical and profitable crypto arbitrage.

The above example was of centralized exchanges. The differences in prices are also present on DEXs. To illustrate, at the time of writing, the price of 1 ETH on Uniswap V3 is 3585.62 USDC. On the contrary, on 1 Inch Network, it is 3598.11 USDC. As an investor and trader, it is important for you to choose an exchange that offers you a minimum price to buy. 

How to Compare Crypto Prices Across Exchanges

With this knowledge in hand, how do you actually compare crypto prices across different platforms? Here are some ways to find the differences (i.e., potential profits):

• Crypto Price Tracking Websites: Websites like CoinMarketCap and CoinGecko aggregate live crypto prices from various exchanges, allowing you to compare them side-by-side.
  
• Crypto Exchange Aggregators: Crypto exchange aggregators like Rubic make it extremely easy to evaluate exchange rates across hundreds of DEXs simultaneously. Rubic even has a MetaMask Snap (an extension to your browser-based MetaMask wallet)  for finding the best prices of different cryptocurrencies across 330+ DEXs.
  
• Trading and Charting Platforms: Advanced charting services (like TradingView, CryptoCompare, or specialized arbitrage tools) let you plot price feeds from different exchanges and set alerts for any divergence. Some platforms can send notifications if the price on one exchange strays beyond a certain threshold compared to another.

Can You Profit From Exchange Price Differences?

Now, let’s get to the exciting part: profiting from these price discrepancies! This practice is called crypto arbitrage, where you exploit price differences between exchanges to make quick gains. 

What Is Crypto Arbitrage?

Crypto arbitrage refers to the general strategy of profiting from price differences of the same cryptocurrency across different venues. In essence, traders believe that markets will converge eventually, so they “buy low and sell high” simultaneously. To continue our example, traders can purchase BTC on BitMEX at 113897 USDT and sell it on Binance at 113966 USDT. It is also essential to consider other factors, including platform fees, withdrawal fees, the capital deployed, and the time required to complete the process, for practical and profitable crypto arbitrage.

Types of Arbitrage: Simple, Triangular, Statistical

There are three most popular types of arbitrage:

• Cross-Exchange Arbitrage: This is the most common type. You buy a cryptocurrency on an exchange where the price is lower and then sell it immediately on another exchange where the price is higher. The profit comes from the price difference minus any transaction fees incurred.
  
• Triangular Arbitrage: This involves a three-legged trade exploiting price inefficiencies across multiple cryptocurrencies. It’s more complex than cross-exchange arbitrage and requires specialized tools and quick execution. Experienced traders often use algorithmic trading to execute triangular arbitrage.
  
• Statistical Arbitrage: This is a quantitative strategy that looks for mean reversion or correlation breakdowns among related assets. Rather than relying on an obvious price gap at a moment in time, stat arb uses historical data and models to predict price relationships. In crypto, this might mean monitoring pairs that usually move together and betting that any temporary divergence will revert. Statistical arbitrage requires sophisticated algorithms and a lot of data, since it bets on very small, short-lived anomalies.

Challenges of Arbitrage: Speed, Fees, Risk

Arbitrage trading is often touted as “low-risk,” but it has its own pitfalls:

• Speed and Technology: Markets move fast. Traders rely on high-speed connections and sometimes colocated servers to shave microseconds off execution time.
  
• Fees and Costs: Each trade can involve maker/taker fees, exchange withdrawal fees, and blockchain network fees (for on-chain transfers). These can erode the profit margin. One must ensure the price gap is significantly larger than the total fees.
  
• Liquidity and Slippage: If you try to trade more than the available order sizes, you will experience slippage, getting a worse price than quoted. This risk means arbitrage opportunities effectively vanish for large orders.
  
• Regulatory and Operational Delays: Some exchanges are slow in processing withdrawals. Even if you spot an arbitrage opportunity, you need to move coins to the other exchange quickly. Bank transfers for fiat, or network congestion on crypto transfers, can cause critical delays.

Rubic: Aggregating Crypto Exchanges for the Best Rates

While arbitrage sounds lucrative, it’s not without challenges. Identifying opportunities, transferring funds quickly between exchanges, and minimizing fees require expertise and automation tools that aren’t easily built up. Here’s where Rubic comes in. Rubic is a decentralized exchange aggregator that allows you to swap cryptocurrencies across multiple exchanges, finding the best rates automatically. In other words, Rubic acts like a crypto exchange price comparison tool in real-time. This eliminates the need to manage multiple accounts and simplifies the arbitrage process. You can choose from an ecosystem of 330+ DEXs, 30+ bridges, and 15,500 tokens.

Conclusion

The crypto price difference between exchanges varies due to multiple reasons. However, understanding the reasons can help you find the best opportunities and make informed trading decisions. Remember, crypto markets are dynamic, and prices can fluctuate rapidly. While arbitrage can be a profitable strategy, it also carries inherent risks. Always factor in transaction fees, market volatility, and the potential for sudden price movements before taking the plunge.

Compare crypto exchange rates on Rubic and optimize your trading strategy today.

FAQ

Why is BTC cheaper on some exchanges? 

This usually happens because of lower local demand or liquidity. If an exchange has few buyers for BTC at a given time, the price they’re willing to pay may be lower. Conversely, exchanges experiencing a buying rush (perhaps due to local news or regulations) can have higher prices. Regional effects can be significant. Fees and spreads also play a part. An exchange with higher trading fees might show a nominally higher BTC price to compensate.

Can I make money with crypto arbitrage? 

Yes, arbitrage exploits real price gaps for profit. However, actual gains depend on capturing the gap before it closes and keeping costs low. The potential is there (and seasoned traders do profit from arbitrage), but it requires speed, capital, and low transaction costs.  It is important to note that arbitrage “carries inherent risks” and requires factoring in fees and volatility. New traders should experiment with small amounts or use aggregated tools to reduce risk.

Do CoinMarketCap or CoinGecko show “real” prices? 

These sites aggregate data from many exchanges, so their “price” is typically an average or composite, not the exact last trade price on one exchange. They display the best available prices from the sources they follow, which serves as a useful benchmark. 

Are price differences legal or a sign of manipulation? 

Price differences are a normal market phenomenon and are legal. They reflect supply-demand imbalances, not necessarily foul play. While rare cases of manipulation have occurred (and are heavily scrutinized), most disparities are innocent. 

How do swap (DEX) platforms compare to CEXs for pricing? 

Decentralized exchanges (DEXs) use automated market makers, so prices are set by liquidity pool ratios and can shift with each trade. DEX prices can sometimes be slightly higher due to slippage on large trades. Centralized exchanges (CEXs) use order books and may have deeper liquidity for big coins. 

Which crypto exchange has the lowest prices? 

There isn’t a single answer, as rates fluctuate constantly. Generally, major exchanges with high volume tend to offer the tightest spreads. However, fees differ per platform, so an exchange with a slightly higher listed price but lower fees could end up cheaper after costs. The best approach is to compare in real time. Rubic is a DEX aggregator, but can also be used as a crypto exchange price comparison tool to find the lowest net price at any moment