XRP price dispersion

[Seth]

I'm curious about what I see as significant price dispersion across exchanges. Currently, for example, I see a price of $2.67 on Bitstamp (the exchange on which I purchased XRP). But other major exchanges (the markets with higher trading volume) are quoting prices of $2.51 - $3.01. That's a 20% spread. Much wider than I would expect. And Coinmarketcap.com (one of the most widely referenced media sources cited for XRP pricing) has a price of $3.37, although I suspect part of that is an unreasonable exchange rate used for the exchange from South Korean won to the $US. 

Any insight on reasons for the wide dispersion?

 

[xrpmoonboiz]

Every exchange is its own market, which is why the prices are different. Coinmarketcap takes the average of the exchanges, and for XRP tends to be higher since Asian exchanges have higher XRP prices

[xrpmoonboiz]

And I believe I read that Coinmarketcap uses a weighted average based on the % of total volume an exchange makes up for that coin

[protechtor]

13 minutes ago, Seth said:

I'm curious about what I see as significant price dispersion across exchanges. Currently, for example, I see a price of $2.67 on Bitstamp (the exchange on which I purchased XRP). But other major exchanges (the markets with higher trading volume) are quoting prices of $2.51 - $3.01. That's a 20% spread. Much wider than I would expect. And Coinmarketcap.com (one of the most widely referenced media sources cited for XRP pricing) has a price of $3.37, although I suspect part of that is an unreasonable exchange rate used for the exchange from South Korean won to the $US. 

Any insight on reasons for the wide dispersion?

 

Many years ago when the spot forex market was in its infancy, I saw the same thing... very wide spreads across market makers (exchanges). Some of this is due to differences in exchange fee structure (some charge separate transaction fee's, some include their fee's as part of the price of the pair, thereby increasing it), but in many cases it is due to volume and demand on that particular exchange. These inter-exchange spreads will start to lessen once the crypto market matures. For now, there are many who find a ways to trade the arbitrage... especially when volatility hits. For me, the risk associated with new/unknown exchanges is another set of risk of investing/trading in an already volatile market with a highly risky asset. But, to each their own. 

[Seth]

Thanks for the response. I believe you're correct, that a weighted average is used by  coinmarketcap. And I also believe that the highest volume exchange, by far, is a South Korean exchange (which may explain a significant portion of the variance).  But even putting coinmarketcap aside, the other exchanges just seem to have a very high dispersion. Especially given the larger trading volume in the past month which I would have thought would narrow the spread. 

[Seth]

Thanks protechtor. Helpful. And I agree about attempting to arbitrage the spread. Not worth it due to reasons you cited, as well as execution delays in the midst of volatile price swings, and often unfair conversion rates on fiat and/or digital currency.