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Why is Ripple Selling at 30% Lower Prices in Koinex?

Some cryptocurrency traders have noticed that some coins sell for vastly different prices on different exchanges. This has led many to wonder why this happens and if it’s possible to earn a profit from these price discrepancies. 

We will answer both of those questions in this article. 

Why Do Cryptocurrencies Sell For Different Amounts On Different Exchanges?

The first thing that new cryptocurrency traders notice is that different exchanges have different prices for the same cryptocurrency.

For instance, it’s possible to buy Bitcoin on Binance for $44,067 and sell it on Coinbase Pro for $44,107. 

Note: We know that is not a particularly large price difference and it’s not Ripple, but it illustrates the point well enough

There are a few reasons for these price discrepancies between exchanges. The primary reason is that each exchange has a different amount of liquidity. This means that exchange with more liquidity (ie. from someone selling a large amount of cryptocurrency at once) will have a lower price as there is more supply) should sell the cryptocurrency for a lower amount than an exchange with less liquidity. 

The reason this exists is because there isn’t an agreed upon way to price cryptocurrency. The price of a cryptocurrency is determined by the supply and demand of a particular exchange. And that price is only relevant on that particular exchange. 

The final reason that we see price differences across exchanges is that it’s difficult for arbitrageurs to move between exchanges to earn a profit. It has become easier for crypto arbitrageurs to earn a profit, but it’s still difficult and requires a large amount of capital.

Why is Ripple 30% Lower on Koinex?

There was a story a few years ago about the price of Ripple on Koinex falling 30% lower than other exchanges. Stories like this pop up from time to time, and the explanation is not a complicated one. 

Basically, someone will market sell a large amount of cryptocurrency on a smaller exchange, which crashes the price of the cryptocurrency on that exchange. 

If the price difference is large enough, then arbitrageurs will take the risk to earn a profit. This means a large increase of demand for the cryptocurrency on the exchange that has it cheap. The price of the crypto rises until it’s unprofitable for arbitrageurs to earn a profit. 

Now, sometimes an exchange will have ridiculously high fees, so arbitrageurs will not purchase the cryptocurrency even though the price difference appears high on paper. 

It’s simply not profitable to arbitrage that cryptocurrency due to various fees. 

Is It Possible To Earn Money Arbitraging Cryptocurrency on Different Exchanges?

Yes, it is possible to earn money arbitraging cryptocurrency across different exchanges. However, it has a lot of risk and the reward really isn’t that great. 

We don’t recommend arbitraging cryptocurrency unless you have an automated script for it. Even then, you still run the risk of the market collapsing before you complete your trade. 

If you do not have an arbitrage script, then you will have to compete with people using scripts. These scripts will take a profit of $0.01 because they can do it much faster than a human. 

Our point is that you can’t compete with an arbitrage script on a serious level. You might make some money here and there when an arbitrage opportunity occurs, but don’t expect to make a living at it unless you have a large amount of money and an automated script to perform your trades. 

What is The Solution to Price Differences on Cryptocurrency Exchanges?

The only solution to price differences on cryptocurrency exchanges is to make arbitrage across different exchanges much easier. This will eliminate the price differences as arbitrageurs will capture the margin between different exchanges. 

One solution for this would be to make it easier for users to purchase large amounts of cryptocurrency on different exchanges simultaneously, which would completely eliminate any major price differences between exchanges. 

The chances of this happening are extremely low, though. 

Are Price Differences on Different Cryptocurrency Exchanges a Problem?

No, having the same cryptocurrency cost a different amount on different exchanges is not a problem. It can make determining the price of a cryptocurrency difficult because literally every exchange has a different price and you may pay a little more or less on an exchange, but the overall impact on cryptocurrency is small. 

The market just isn’t efficient enough to whittle down the price difference between exchanges fast enough. These opportunities to earn 30% or more by arbitraging cryptocurrency across exchanges will likely disappear as the market becomes more efficient. 

In fact, there are far fewer arbitrage opportunities in cryptocurrency than there were in 2017, which shows the increasing efficiency of the market. 

Closing Thoughts

Price differences between different cryptocurrency exchanges is a symptom of an inefficient market. The good news is that this has a relatively low impact on how traders participate with the market. 

Now, it might seem like easy, free money to arbitrage cryptocurrency across exchange, but it’s not. These arbitrage opportunities sometimes exist for a few hours because of the difficulty of moving cryptocurrency across exchanges along with the fees that must be paid to do so. 

Why is Ripple Selling at 30% Lower Prices in Koinex?