The Arbitrage Journey #2

🔍Who Decides Bitcoin's Price?

After the previous post, several people asked a similar question:

"If Bitcoin can have different prices on different exchanges, who actually decides its price?" 🤔 Good question.

Many people imagine the market like this:

There is Bitcoin.

There is an official price.

And every exchange simply displays it.

But that's not how markets work.

Think about a local marketplace. One person wants to sell an apple for $1. Another person is only willing to pay $0.99. No trade happens. A price only exists when a buyer and a seller agree.

📈 Bitcoin works the same way.

On every exchange, thousands of buyers and sellers continuously place orders. Every trade affects the market. Every new order changes the balance between supply and demand. That's why the price doesn't come from above. It is created in real time by buyers and sellers competing with each other.

Now here's the interesting part.

If every exchange has its own buyers and sellers...Why should all exchanges have the same price?

👀 We'll explore that in the next post.

Next stop on The Arbitrage Journey:

Why Exchanges Disagree