Why does a cryptocurrency have different prices?

Why does a cryptocurrency have different prices?

The variation in the value of cryptocurrencies in the platforms it can be found, is one of the most polemic topics around the digital market.

To understand this concept, first we need to explain that ALL currencies -including fiat currencies- have different listings depending on the market in which they trade. For instance, in Mexico the price of the dollar varies depending on the financial institution it is traded.

Let's analyze this charts:

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As we can see, the dollar has a different buying and selling price depending on the institution. The same happens with cryptocurrencies that have different buying and selling prices. It depends of the Exchange in which they trade.

Now let’s take a look of the different markets for Bitcoin, according to the well-known platform CoinMarketCap.

valor-criptomoneda

As we can see, the Bitcoin price goes from $8,088.93 USD to $8,728.09. The variation, just in the Top-20, is of $639.16, but the prices keep changing as the list goes on.

valor-criptomoneda

Down in the 60th place we can see that LakeBTC lists a price of $11,751.20, which amounts a variation of $3,662.27 USD.

Now that we understood EVERY currency, fiat (dollar, euro, peso, etc.) or digital (Bitcoin, Ether, Litecoin, Ripple, ATM Coin, etc), vary depending of the platform and transaction, let’s see why.

It is impossible that a currency has a unique value, because it always must be acquired for buy-sell purposes, either with the same or different kind of currencies; that process is known as parity. For instance, ATM Coin has the following parities:

  • ATM Coin / Dollar (crypto / fiat)
  • ATM Coin / Euro (crypto / fiat)
  • ATM Coin / Bitcoin (crypto / crypto)
  • ATM Coin / Ether (crypto / crypto)
  • ATM Coin / Ripple (crypto / crypto)
  • ATM Coin / Litecoin (crypto / crypto)
  • ATM Coin / Dogecoin (crypto / crypto)

And it has a different value with each one of these parities, because it's negotiated independently with each one. Like the dollar, that has a different price for every fiat currency in the world because it’s negotiated independently with every country -or even within a same country-, every financial entity determines a different purchase value for the dollar.

Actually, Bitcoin, ATM Coin, and digital currencies in general, work in a very similar way to the traditional economy, and we’ve mentioned the only differences are that they are anonymous, digital a decentralized.

Altcoins aren’t the first digital coins we have used. Indeed, we’ve been using them for years with omline banking and credit and debit cards; we are used to gamble with digital coins at the casinos; same case for online gaming, where you get “packages” of “coins” that you can use depending on the game.

Considering this, we are actually more acquainted than we think with the way digital currencies work. We negotiate frequently with similar elements; and we understand it is perfectly normal to either win or lose in these deals.

Have you noticed that lemons or tomatoes have different prices in different stores? We accept that and we don’t think it's unusual, because we’ve dealt with it all of our lives; we are used to compare the price for one shirt in different stores, and once we find the right one, we go back and buy it at that store. It is the same for the stock market, forex, cryptocurrencies, etc. We are always looking for the best price.

As you can tell, it is pretty normal that cryptocurrencies' prices vary depending on the Exchange. What we must do, is learn to identify the best value of the digital currency we want to buy, according to the platform in which we will “negotiate”. In Bits Blockchain, ATM Coin has a value for every parity. If you want to trade with Bitcoin, you must look for the ATMC/BTC parity; if you are trading with Ether, look for ATMC/ETH. For e-commerce in Bits Club and its franchises, the platform will post the exchange rate.

Don’t forget that if you have any questions about cryptocurrencies, you can post them in the message board, and I'll be more than happy to address them in future entries.

 

By Javier Espinosa

  • Ing. Javier Espinosa

    Ing. Javier Espinosa

    Ing. en Sistemas Computacionales con especialidades en Tecnologías de la Información y Desarrollo Humano. Socio fundador de ITDA Corp.

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