One bitcoin exchange isn't directly connected to another. So price in bitcoin can vary from one exchange to another. The price differences are not usually huge.

One bitcoin exchange is only weakly connected with another bitcoin exchange. If price in one exchange is higher than price at another, people can buy where price is cheaper, transfer bitcoin to another exchange and make money. This is possible because the nature of cryptocurrency is that you can transfer money around easily.

I couldn't imagine the same thing in forex exchange. Say price of USD is cheaper in roboforex than in forex.com, I wouldn't imagine people buying USD in robo forex, cashing it in a bank and wire or send the money to forex.com

So what actually happens in forex exchanges?

To summarize

I know how money moves around in bitcoin exchanges. The user moves the money. If the users cannot easily move money around then the prices between exchanges will vary greatly.

In one exchange, coinexchange, for example, there was a time where ETH is in short supply. It took 10 hours confirmation to send ETH to coinexchange. So for a while, the price of ETH in coinexchange is 10 persent higher. Those who happen to have ETH in coinexchange can make a fortune selling ETH there. And then send the bitcoin to other exchange. Of course, they have to wait 9 hours for another cycle to work.

How do dollars and euro moves around in foreign exchanges? Do all exchanges have reserve accounts in various currencies in some banks? What happen if too many people buy EUR in one exchange and too many buy USD in another. What will happen? Will the bank automatically swift money around?

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    $\begingroup$ Arbitrage ! If prices are off on one exchange compared to the other, you can buy on the one (driving prices higher) and sell on the other (driving prices lower) so that the prices converge. $\endgroup$ – nimbus3000 Apr 14 '20 at 13:20
  • $\begingroup$ fedwire swift is immediate and cheap? Banks? What banks? In bitcoin exchange we don't have "banks". The exchange store the bitcoins. Do forex exchanges store bitcoins? Do they have bank accounts in multiple currencies? $\endgroup$ – user4951 Apr 14 '20 at 14:34
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    $\begingroup$ I’m confused now, do you want to know why regular currencies or crypto currencies prices don’t deviate? $\endgroup$ – Bob Jansen Apr 14 '20 at 14:49
  • $\begingroup$ How exactly price in one exchange is similar to price on the other? In what ways are they connected? I ask this because unlike crypto, fiat is difficult to move around. You said they use fedwire and swift. Who uses fedwire and swift? The exchange? The user? The bank? What bank? What's the relationship between exchanges and banks? $\endgroup$ – user4951 Apr 15 '20 at 11:48
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    $\begingroup$ Can you turn this into an answer? $\endgroup$ – user4951 Apr 20 '20 at 2:45

Banks and arbitrageurs move money around with limited difficulty. That's one of their main functions. They move enormous volumes daily.

Furthermore, I believe that for retail markets, whenever there is an opportunity to earn relatively risk free money, people will try to take advantage of it. More so if what they are doing is completely legal. If it means if they have to jump through some hoops to set-up accounts in multiple places, they will find way.

To elaborate:

Banks are in the business of moving and holding money, their own and others. They have developed highly efficient and complex to do this which can clear a large number of transactions. I don't know how retail traders would move money around to perform arbitrage as I'm not sure the arbitrage is worthwhile on most platforms. I did hear stories of people setting up accounts in South Korea (maybe through friends and family) when BTC was trading at a premium there and performing arbitrage in such a way. Such a construction would work for any trade.

  • $\begingroup$ how exactly they do so? $\endgroup$ – user4951 Apr 21 '20 at 11:11
  • $\begingroup$ Banks or retail traders? $\endgroup$ – Bob Jansen Apr 21 '20 at 11:11
  • $\begingroup$ Who moves money around? Banks or retail traders? That's a first. $\endgroup$ – user4951 Apr 21 '20 at 14:21
  • $\begingroup$ There are dedicated arbitrageurs who do this every day for their living. Even Big banks and investment firms have a portion allocated to take advantage of such opportunities. They don't do it manually. Everything is automated and the program automatically takes advantage of such opportunities. Comming to the movement of cash, they are the system so they can move funds from any country to another without any fees or conversion costs. Would it be a problem for HSBC to move funds from UK to the US? Or to HongKong? or to India? They have branches in all countries and movement is a keystroke away. $\endgroup$ – user43629 Apr 21 '20 at 19:24

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