Bitcoin pricing on local exchanges can vary greatly from the average exchange rate on international platforms.
The price users pay for a Bitcoin can be influenced by numerous factors, including trade volume and market size.
Many South Africans have also noticed that the price of Bitcoin on local exchanges is different to that shown by Google’s exchange rate.
At the time of writing, a single Bitcoin cost R37,000 on South Africa’s biggest Bitcoin exchange, Luno.
However, searching for the Bitcoin price using Google delivered a value of only R33,000.
Google Finance’s disclaimer states that its current Bitcoin price is calculated using data from Coinbase, a popular international exchange.
This amounts to a difference of R4,000 between international and local Bitcoin pricing – an issue Luno addressed in a recent blog post.
The exchange said there is no standard or global Bitcoin price, and its local price is determined primarily by supply and demand.
Luno also pointed out that the Bitcoin price listed by Google is an average of recent trade values on Coinbase, and excludes transfer fees and other costs involved in purchasing Bitcoin with fiat currency.
This means that the Bitcoin-to-rand exchange rate shown by Google is the US dollar value converted to rand, and is not representative of local markets.
Bitcoin in South Africa
Luno said its Bitcoin price was more expensive than international exchanges due to the supply and demand of the South African market.
An exchange is a platform which allows users to sell Bitcoin to buyers, and the amount of sellers relative to the amount of buyers determines the Bitcoin price for that particular exchange.
The price of Bitcoin can vary greatly from one exchange to the next, depending on the individual markets of these platforms.
Luno’s Werner van Rooyen said the main driver of the local Bitcoin price was the South African market, not the exchange.
“Although it is easy to speculate about the causes for the Bitcoin premium seen from time to time, it is important to realise that you are not trading directly with Luno,” said van Rooyen.
“We merely provide the platform upon which buyers and sellers interact. The forces of supply and demand ultimately determine the price,” he said.
The lack of a standard or tethered Bitcoin value allows for users to potentially engage in arbitrage.
Arbitrage is defined as the buying and simultaneous selling of assets in different markets to take advantage of differing prices for the same product.
This can be profitable, depending on the user’s local exchange and the price difference between markets, but is also limited by transaction fees and other costs involved in moving money internationally.
Arbitrage does occur, although it is reliant on market conditions, transaction speeds, and transfer costs.
Recently, there was a massive discrepancy between Bitcoin exchanges in South Korea and international averages, allowing users to make large profits thanks to arbitrage opportunities.