Cryptocurrencies are decentralized currencies that are generated on a blockchain. Of late, cryptos like bitcoins, dogecoin, etc., have gained a lot of popularity. Many people have started investing and trading in these assets to gain high profits.
Cryptos And Their Values
The profitability of a cryptocurrency depends on a host of factors like the overall demand for that crypto, the general acceptability of that crypto, etc. However, even for the same crypto, the values are not the same across various exchanges. If you too want to check out the price of a bitcoin to trade in them, you can go to www.bitlq.net.
Factors That Affect The Value Of A Crypto In An Exchange
The Global Demand For A Particular Crypto
The price or the value of crypto is linked to the global demand and supply of that particular crypto. Thus, if a country accepts bitcoins as its legal tender, then Bitcoins gain more credibility. Hence globally, the price of bitcoins should increase across all exchanges that offer bitcoins for sale and purchase.
Again, if a country declares a particular crypto to be banned in its banks and its territories, then that particular crypto will lose value across all the trade exchanges of the world because that crypto will lose usability and credibility.
Acceptability Of A Particular Currency
The demand for any currency rises with the increase in its acceptability as a means of payment. Cryptos are not issued by the government agencies like the federal bank of a country; hence many people believe that they might suddenly lose value someday.
But as more and more companies start accepting cryptos as a means of paying and settling bills, the acceptability of these currencies also increases. So if bitcoins are acceptable by many companies for making payments, then the price of a bitcoin should increase across all exchanges of the world.
Liquidity Of A Particular Exchange
The liquidity of a particular trade exchange has a key role to play in determining the price of a bitcoin in that exchange. The liquidity of an asset is the ease with which an asset can be converted to another asset. So if an asset is liquid, it means that it can readily be swapped for other assets like money or gold. Liquidity is also a measure of the stability of an asset. The higher the stability, the more liquidity. For instance, the US dollar is highly liquid because it is the strongest currency in the world and is backed by the US Federal bank.
Likewise, the liquidity of an exchange is the sum total of the liquidity of all the assets it trades. So if a particular place trades in highly stable and liquid assets, then the overall liquidity of that exchange increases. Since liquidity is a measure of stability, the higher the liquidity of an exchange, the higher the price at which a bitcoin trades in that particular exchange.
Different Time Periods For Updating The Values At Exchanges
There are many crypto exchanges in the world, and each of these exchanges is headquartered in different time zones. For instance, if an exchange is headquartered in Beijing, it will follow the standard time of Beijing. The standard time in Beijing is thirteen hours ahead of New York. Hence the working hours in Beijing and New York are also dramatically different.
Hence, if you are checking out the price of a bitcoin at an exchange that is located in Beijing versus an exchange that is headquartered in New York, you will obviously see a difference in price. It is very likely that the exchange that is headquartered in New York will not have updated the changes in the price by the time the latest changes are visible in the Beijing-based exchange.
The world has multiple time zones, and there are many countries that have intra-country variations in time zones. Russia, for instance, is a large country and has eleven time zones. Hence, the trade exchanges of the world can have very high variance in their working hours, and hence the value of any asset in these trade exchanges will be expressed with a lag or ahead of other exchanges based on where they are physically located.
The Base Currency Relative To Which The Value Of Other Assets Is Determined
Different crypto trading exchanges express the value of crypto on the basis of a base currency. The base currency may be a dollar, it may be a pound, or it may be the value of certain grams of gold. But the value of the base currency itself is volatile, and hence the value of a bitcoin also varies depending on the base currency with respect to which its value is expressed.
For instance, today, a bitcoin is worth twenty thousand dollars, but it is worth eighteen thousand pounds. After some days, if the value of a pound increases further, the worth of a bitcoin in terms of a Pound may decrease further. Thus the value of a pound, dollar, etc., that are used as base values have a key role to play in deciding the value of crypto.
Thus any cryptocurrency in the world does not have the same value in all the markets where they can be obtained. Many smart traders use this difference in the price of crypto to gain profits. Traders often buy bitcoin at a low price and sell it at a high price in a very short interval of time.
These traders keep track of global events, and if they see that the price of a Bitcoin is showing a tendency to decrease in value at one place, they will quickly buy as many bitcoins as they can and then sell it at another place at a higher price before other investors can catch a drift of the rapidly changing trend.
The method of making a profit by utilizing the price differential between two markets is known as arbitrage and is often used by crypto traders to make huge windfall gains.