Why the Bitcoin Price is different in different countries
As bitcoin continues to get adopted and the price increases, more and more people always come up with the question of why the price differs in so many countries.
This is caused and affected by many factors but before we will review this causes, its pertinent to remember that bitcoin has no general price. It has no standard or global price. Bitcoin isn’t pegged in any way to the USD or to any other currency, country or any exchange.
Its just like asking
” why the price of a bag of rice cost more in a particular supermarket when compared to other countries currency or city”.
The short and simple answer is simply “demand and supply”. Lets look at this topic deeper now.
I know that would be the first thing to come to your mind, you go to bitcoin and punch in price of 1 bitcoin
When you type 1 btc to usd on google, you might get something like this
or 1 bitcoin to naira
The price we see on google is normally the average estimate of a recently traded bitcoin on most of the popular exchanger websites and institutions just like poloniex and shape shift.
In fact google even uses the api of coin base to calculate recent price of btc. If you have a coinbase account, you will notice that the actual price of 1 bitcoin is not exactly what coinbase says it is.
Most of the new customers from Nigeria whom i deal with always make this predominant mistake. They go to google and search and get a search result like this
This does not mean that every individual platform would sell at this exchange rate on google at the same exact time.
2. Supply and Demand
Another major factor contributing to the price of bitcoin is the supply and demand.
Bitcoin exchanger websites are platforms where People who have bitcoin(supply) and people who wants to buy bitcoins(demand), come together and buy and sell bitcoins.
Now, if the number of people who wants to sell their bitcoins (supply) is greater than the number of people buying(demand), the price of bitcoins drops- SUPPLY IS MORE THAN DEMAND.
If on the other hand, the number of people who needs bitcoins and want to buy (demand) is greater than the number of people who want to sell bitcoins(supply), then the price of bitcoins in that particular place would increase in value as of that exact time- DEMAND IS MORE THAN SUPPLY
So lets assume you have got bitcoin trading at different prices on different exchanges.
Probably its trading for 1,500,000NGN on a Exchange A and 1,400,000NGN on Exchange B, isn’t there money to be made? Like buy on Exchange A and sell on Exchange B.
This process right here is called Arbitrage. It is not as easy as it sounds and i would explain in a bit. Lets assume you can buy ice-creams in Market #1 for a low price and resell in Market #2, its quite easy and sounds like a really good catch, but then, this markets might be very far apart. Then you have to start factoring in the transportation cost, fuel costs, tax. Its actually trickier than just looking at the numbers involved.
Likening this to bitcoins , sending digital currencies is not really free as you get to pay transaction charges per each bitcoin you send to a wallet,not forgetting limits , the minimum or maximum amount that can be sent, time delays, price-volatility risk and fees to trade the money for Bitcoin.
Do people practice arbitrage on the cryptosphere, yes they do, the main problem now is the restrictions, placed on Nigerians from sending money to someone in another country.
So for instance if your friend in France can get bitcoins for the price of 1,300,000NGN and the price currently in the local Nigeria market is 1,500,000NGN. How do you send your friend the money to help you purchase this bitcoins from here in Nigeria. Even if you finally succeed, the charges -transaction charges per each bitcoin you send to a wallet,not forgetting limits , the minimum or maximum amount that can be sent, time delays, price-volatility risk and fees to trade the money for Bitcoin.