It might be confusing to see the same cryptocurrency priced differently on different exchanges. On some exchanges, some cryptocurrencies might be a little higher in price than other exchanges and vice versa.
It could be more complicated for you if you have already been trading in the stock markets because the price of stocks is the same across platforms, forcing you to think – “Do crypto exchanges price cryptos based on their whims?”
Firstly, Cryptocurrency is different from stocks or any other asset class, and it helps to know the following before you dive into the blog:
- Demand and Supply determine the price of any cryptocurrency.
- Exchanges price cryptocurrencies based on their last traded price
How the Cryptocurrency Market Is Different from Other Markets
Unlike the cryptocurrency market, traditional markets are centralised. For example, take the stock markets; irrespective of whether you trade through your broker or HDFC securities, the final trade is fulfilled in NSE or BSE.
Buyer → XYZ broker → NSE/BSE ← ABC broker ← Seller
Therefore, since all trades are executed in a central market (aka NSE, BSE), there is an element of price uniformity across platforms. The same, however, does not hold true for crypto markets since crypto is globalised and does not have one centralised body like NSE, BSE.
Source: Groww and Kite, Zerodha
In the cryptocurrency market, all trades are fulfilled on the platform itself, and all platforms work in silos. Hence each cryptocurrency exchange based on the demand and supply on their platform derives the price of cryptocurrencies, and thus a uniform pricing is not possible.
Does the Price of Cryptocurrency Vary Across Exchanges?
Since cryptocurrency exchanges are independently monitoring demand and supply, the market becomes fragmented. It gets divided into subsets, with every exchange representing one mini market. As the liquidity (demand and supply) vary from exchange to exchange, the price of a cryptocurrency also varies.
For instance, On an exchange where Bitcoin has high demand and comparatively less supply, Bitcoin will be valued higher than on an exchange where there is less demand for Bitcoin and excess supply.
Why Do You See a Higher Price for Cryptocurrencies on CoinSwitch Kuber?
That being said, quite a few of you have been asking as to why there is a higher difference on CoinSwitch Kuber:
1. Liquidity is King
As we mentioned, liquidity plays a critical role in determining which exchange has better rates. Liquidity is the level of trade activity for a coin. The more the buyers and sellers, the higher the liquidity. The higher the liquidity, the more the likelihood of seeing great prices.
Sometimes, you might see a higher price on our platform because of low liquidity, while you could see better prices in cases of higher liquidity.
2. CoinSwitch Kuber – ‘What you see is what you get.’
However, another reason you see a price difference on CSK is that we tell you the cost of your order upfront. The price you see on the platform is the price you can actually buy or sell at.
When you go on any other exchange, they show the last traded price of any cryptocurrency, which may or may not be its current price. Since it is the last price at which somebody bought or sold the cryptocurrency, there is no guarantee that your order will be executed at that price.
CoinSwitch Kuber guarantees execution at the price shown, whereas other exchanges don’t. You don’t pay even a rupee extra than what you agreed on our platform’s ‘preview page.
Take, for example, an exchange that has two sellers in the market – Seller A has 1 Bitcoin for ₹10, while Seller B has 1 Bitcoin for ₹ 11.
Buyer X wants to buy 1 bitcoin – He buys the 1st order – ₹ 10, and the order gets fulfilled. As a result, the buy price is marked as ₹10 on the exchange. When Buyer Y enters the exchange to buy Bitcoin, they see the buy price as ₹10 (last traded price) and assume that they will get Bitcoin at ₹10. However, the following order is for ₹11.
Buyer Y performs the trade assuming that they will get the Bitcoin for ₹10, but the order gets executed at ₹11 instead.
We tell you upfront that 1 Bitcoin will cost you ₹11. We use algorithms to determine the future price for your order and lock it for a brief period for you to finish the transaction at the price shown.
How CoinSwitch Kuber Works Behind the Scenes
Other exchanges have the order book system where you have to place orders to buy cryptocurrencies and scan through thousands of orders to sell. This could be a complicated process for a new investor who has just entered the crypto market. They may get lost in figuring out the order book.
On CoinSwitch Kuber, we try to avoid all of those complications and simplify things for you. We don’t have an order book system; instead, we pool liquidity from leading exchanges, use algorithms and give you an average price for your order. We enable you to buy and sell cryptocurrencies in a few clicks.
The non-existence of a centralised body puts the responsibility of maintaining a healthy trading ecosystem on crypto trading platforms. Thus, the market is fragmented, where no one has complete control over anything, but everybody is responsible for ensuring the smooth functioning of their mini-markets.
However, we take it a step further and ensure the effective working of our ecosystem and simplify it for people.
Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.
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