TODAY: Prices: Bitcoin (BTC) $6,450 (+0.2%) | Ether (ETH) $133 (-0.1%) The curious case of Bitfinex's price premium Market news and analysis: Crypto vs. equities
While not nearly as pronounced as it once was, cryptocurrency exchange Bitfinex often still operates with a bitcoin price premium.
This phenomenon was first observed by CoinDesk in 2017, when bitcoin's price hit a (then) all-time high of $1,411 on Bitfinex. In 2019, when Bitfinex's premium was over $300 more than many exchanges, some data providers decided to stop using the exchange in calculations for bitcoin's price.
Let's look at the premium between several different exchanges – Bitfinex, Coinbase and Bitstamp – since Jan. 1, 2019, calculated by daily close prices on a 30-day rolling average.
The first thing that stands out is the yellow line representing the difference in pricing between Coinbase and Bitstamp. What gives? Well, Coinbase and Bitstamp have consistently similar bitcoin pricing despite one domiciled in the U.S. (Coinbase) and the other in Europe (Bitstamp).
The main thing Coinbase and Bitstamp have in common is fairly good access to the traditional banking system. So let's eliminate that comparison in the chart:
Bitstamp and Coinbase are pretty much in lockstep, whatever's going on. Over at Bitfinex, bitcoin prices are always more expensive than these two. But compared to the first half of 2019, when Bitfinex began having legal problems, things have got much better.
March 2020 seems to be signaling a change between Coinbase and Bitstamp's relationship to Bitfinex's price premium:
While not as pronounced as it once was in 2019, the Bitfinex premium has reared its head in 2020 as markets have experienced a good amount of turmoil.
Once the crypto price crash occurred on March 12, prices between Bitfinex, Coinbase and Bitstamp diverged. This is good for arbitrage traders in tumultuous markets like this.
But trader beware: The premium on Bitfinex likely comes from its inability to process enough actual cash withdrawals. It hasn't been a very friendly customer to banks – the exchange even tried suing Wells Fargo at one point. Negative news about Bitfinex can raise the spread, whereas positive news has the ability to lower it, which is likely a signal of how many fiat withdrawals are being requested at a given time.
The Bitfinex premium may signal some kind of eventual problem on the exchange around the bend. But for the time being, traders are loving this price discrepancy.
– Daniel Cawrey, Markets Editor (dcawrey@coindesk.com)
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