Some people might say Bitcoin’s price differently, because of the price differences between their national currency rates and USD rates. More generally, to mention the price of Bitcoin, we say that as of today, its price is approximately 50,000 USD.
However, Bitcoin’s price value is different from country to country, thus it gives people the possibility for arbitrage. This is because different countries buy and sell Bitcoins at different prices because it has no international price which was admitted by everyone and exists as a shared trust. This happens because people might not have agreed on what bitcoin is, yet.
The purpose of Bitcoin
Everybody has their own reasons why they buy Bitcoins. This happens because if you have a certain amount of money, you know that you will go and buy something, invest in something, or travel. However, you cannot use Bitcoin for any special purpose and this is why people keep buying Bitcoins for different reasons and purposes. Some of them even believe that the blockchain technology, on which Bitcoin is based, will flourish someday.
The main and the most important reason generally, is that people are looking forward to several years and think that they will use this innovation after several years under different circumstances, hoping to use it in everyday life. And last but not least, BTC is often bought in the hope to sell it at a much higher price some days later.
The speculative nature of Bitcoin gives BTC owners to sell it at a price that the buyer is ready to pay. It looks more like selling an apartment, it does not have a given price, you set the price, which is worth it for you and if it is acceptable for the buyer, the deal is done. For example, in India, BTC is sold at 20% more price than the U.S market, and the difference between buying and sell prices is 1000%. And why are people still buying it? Because they do not have any other choice.
Bitcoin price differences: there is no standard
The discrepancy between the BTC prices can be explained by the fact that as a decentralized digital currency, Bitcoin does not have standard or global Bitcoin prices. It is not guaranteed by USD or any other currency, as money is equivalent to gold. As the main driving factor of the economy is the balance between supply and demand. Due to the fact that the demand for Bitcoin is different from country to country, the price range is different from country-to-country as well.
Average price estimates
We cannot be sure that the price tracker in the case of Bitcoin is always accurate because they calculate the average based on the recent transactions of prominent exchanges. For example, Google might use Coinbase, where the BTC price might be different from the BTC price on the other platforms.
Moreover, people search for the price in their national currencies, such as South African Rand or Nigerian Naira added to that the fees and other variables.
Does the BTC price change from country to country give people an opportunity to make an arbitrage? Yes, and the Nigerian case proves its validity.
In Nigeria, one Bitcoin might cost 68,000 USD. This means that the owner of BTC would get more Nairas per dollar when he/she converts its local currency. However, buying becomes more expensive too.
1 USD is approximately 380 Naira. Chief executive officer at social payment app Bundle Africa said that the exchanges are more likely using informal dollar rates and the local price of BTC fluctuates. This everything indicates that the local Bitcoin markets exist outside of government rules, according to a professor from the University of Chicago, this means that there is the manipulation of the nominal exchange rate.
Those circumstances created fertile soil for the people living outside of Nigeria and involved in online gambling. These people were changing their VPN address as if they were located in Nigeria. This has given them opportunities to earn Bitcoin gambling in Nigeria based BTC casinos which they would withdraw for the local price which is more than the worldwide average. Apparently it was even possible just to transfer for example $1000 worth of BTC on a casino account, play a round or two not to be suspicious and then withdraw $1270 as the price difference at the maximum point was 27%.
One of the main possible reasons for the Bitcoin price differences from one country to another might be inflation.
Take Venezuela as an example. If a Venezuelan resident is owning Bitcoin it is quite anticipatory that he/she would demand a higher price on it, to have more profit in comparison to his country’s currency. Due to the fact that the inflation rate in Venezuela was 10 million % against USD, people massively started turning to Bitcoin.
Inflation was one of the reasons why we have mentioned Nigeria as an example above in the article. The demand on Bitcoin was so high that the central bank of Nigeria was forced to shut down all the accounts which were connected with the crypto trading. After that, the demand for Bitcoin was dropped.
It is not a coincidence that we have mentioned developing countries as examples of big changes in Bitcoin prices. Generally, those are the countries that have high inflation rates and it affects the demand on the BTC as well.
Finally, to sum up, everyone, who is involved in the crypto-industry has information about the BTC price differences and some professionals even change their VPS address to have guaranteed more profits. The changes are usually caused by the different currency rates and demands on one country’s financial market.
As Bitcoin’s price is not yet officially on the International Financial market, it can be sold at a price, someone is ready to pay. Price differences are usually high in developing countries, as we have mentioned Nigeria or Venezuela and one of the reasons for that is the high inflation rate in the country. The governments have taken actions to stop the massive demand for cryptocurrency and as of now, the demand for Bitcoins is declined.