P2P has been around for some time now. Speculating about the difference in asset prices between different exchanges and providers has been proven to make dozens of people into billionaires. However, we all know crypto is always different from other investment and financial assets and so it is with Peer-To-Peer. Now we will cover up the main reasons why prices can have an up to 1000%+ difference and how to hunt the best exchanges for arbitration.
The first reason is obvious - algorithm speed.
During the sudden dips and grows some exchanges struggle with keeping all the up-to-date information on their servers and interrupting with it at the same time. And that’s why you can occasionally see a huge price difference, where some exchanges have already updated their price rate and some have not. Keep in mind that such situations are and actual holy grail and have to be exploited immediately, while the exchange is still using the old rate as the actual one.
Moreover, liquidity also influences the price rate on smaller exchanges because the token obviously has to be utilised and traded to be liquid and be in demand, holding the market price. This makes local exchanges with a low amount of users and even less daily operations incapable of competing in the token prices with bigger exchanges.
Secondly, traders hate fees
The bigger fee an exchange has on a certain coin - the more chance there is a trader will avoid using that exchange. That also leads us to exchanges with low amounts of transactions because it costs money to keep the net working and the amount of users is proportionally pegged to the tax each of them has to pay.
However, don’t confuse an exchange that can’t keep up with the market flow and the one that just puts mind-blowing taxes over the trades trying its best to somehow make profit from the few of its poor users - we are aiming for the first, but never for the second.
We are checking the market on a daily basis and right now the things are generally starting to come back to normal, so beginning our continuing your P2P journey to see the movement right from the inside would be one of the best options available.