This discount averages about 2 percent and has at times been higher than 20 percent. Large, persistent deviations between pairs of identical assets are unusual in exchanges and, when they have occurred as for so-called Siamese-twin stocks , they typically have not constituted profitable arbitrage opportunities. For bitcoin, an arbitrageur could, in theory, safely profit by buying bitcoin on BTC-E and then selling it or going short by first borrowing bitcoin and then selling it on either Bitstamp or Bitfinex.
Transaction costs come in two forms: the bid-ask spread and trading fees. As shown in the price difference charts above, however, the bid-ask spread as a percent of BTC-E price in these exchanges is negligible relative to the typical price difference, and thus does not likely impede arbitrage significantly. Other fees, however, represent more substantial barriers.
BTC-E, for example, charges a 0. These fees reduce the profits from arbitrage, and may explain the observed price differences. Bitcoin arbitrage opportunities across exchanges may also pose two risks: price changes due to delays in executing transactions and counterparty risk from exchange failure or fraud.
In fact, bitcoin prices are volatile; the intraday volatility of the bitcoin price on BTC-E often exceeds the average price difference between it and Bitfinex see chart below. Therefore, delays in executing trades imply that the price difference can shrink or even revert before an arbitrageur can exploit it.
The most significant delay is in the transfer of U. A trader wishing to execute this trade by transferring dollars to BTC-E faces significant risk of price changes over that period.
In order to deposit bitcoin for use on Bitstamp or Bitfinex, three network confirmations are required. Each confirmation takes ten minutes on average, so the delay between the purchase of bitcoin on BTC-E and its deposit on Bitstamp or Bitfinex is about thirty minutes. This shorter delay is avoidable by short selling, but shorting is only offered by Bitfinex and entails additional fees. Exchange failure or fraud is another source of risk. Exchange failure is not merely a theoretical possibility in bitcoin markets—it occurs regularly.
A study in reported that eighteen of the forty bitcoin exchanges analyzed—almost half—ultimately failed. Most notable among all bitcoin exchange failures is that of Mt. Counterparty risk could help explain the consistent discount realized on BTC-E. This is simply a CEO who is in way over his head and doesn't know how to do communications.
Gox says it's still working on the problem , though it won't say when it will again allow bitcoin withdrawals. But if the company is insolvent, investors are responding appropriately.
Should the company go bankrupt, it may indeed be easier to get dollars out of the company than bitcoins, says Mark Thompson, a retired bankruptcy lawyer based in New York. According to Thompson, the U. But he doesn't know what would happen in Japan, Mt. Gox's home, and he believes that bitcoin debts could still create some problems in the U.
For example, courts deal with government backed currencies all the time, but as they're liquidating assets, how do they figure out what any owed bitcoins are worth? If investors truly think Gox is going out of business and that the price of bitcoin is going to crash because of Gox's problems, it could make sense to lock in their U. The bitcoin world often moves in mysterious ways.
But ultimately, it's like any other market. Measure ad performance. Select basic ads. Create a personalised ads profile. Select personalised ads. Apply market research to generate audience insights. Measure content performance. Develop and improve products. List of Partners vendors. Gox was a Tokyo-based cryptocurrency exchange that operated between and Although it is most commonly known as Mt.
Gox, the exchange is sometimes referred to as MtGox or Mt Gox. The exchange declared bankruptcy in , but it continued to be the subject of lawsuits and speculation. Jed McCaleb created the website that became the Mt. Gox exchange. It was originally a way for enthusiasts of the card game "Magic: The Gathering" to trade cards online. The name Mt. Karpeles became the largest shareholder and CEO.
At its peak, Mt. Handling so many transactions gave Mt. Gox an outsized role in determining the fate of bitcoin. In , for example, it suspended trading for several days to cool down the market.
Its prominence also made it a target for hackers, and Mt. Gox experienced security problems several times during its years of operation. In , hackers used stolen credentials to transfer bitcoins. World Show more World.
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