Last night I was about to make a manual trade on one of my exchanges and I noticed that there was a significant price discrepancy on a couple of different market watches and my exchange. I wasn’t being distrustful of my exchange; however, I wanted to see which direction this particular altcoin was going before I made my decision. After, all, if it was going to go up some more, why not be patient and wait?
I looked at www.coinmarketcap.com and from what I could tell, the live quote was running about 30 minutes or so behind my exchange (Coinbase). Then I looked at www.coincodex.com and noticed that it was quite a bit different on every coin I compared from other market watches and a couple of different exchanges.
I went down a bit of a rabbit trail for an entire evening researching and comparing prices and reading reports. There really isn’t a lot that has been written on it, but I discovered some things that I want to share.
Since each exchange is its own market, each website or exchange will determine prices. Most of them will be close, but when you trade on a particular exchange, what that exchange quotes as the price IS the price in that exchange and it does not matter what the other exchanges say. If you don’t like the prices in your exchange, then you should find another exchange.
In the stock market, you can go to different websites, and every site will show identical (or close to exact) numbers for stocks, ETFs, indexes and other averages. That is because they are all quoting from a central point. Cryptocurrencies do not work that way.
From what I understand, CoinMarketCap quotes an average of major exchanges and then displays that average price. If that is the case, then logically, it would run a little behind the exchanges from which it is compiling data. Therefore, you aren’t going to be able to study CoinMarketCap and get an edge on trading with foresight on your favorite exchange.
However, for those of us that are not just relying on stops and limits on our trades, or if we are just ready to cash out or move an asset to a stablecoin like USDT or DAI for a while, we want all of our information to be accurate and up-to-the-second.
This is not the same as crypto arbitrage—a practice of trading a digital currency on one exchange for a lower price and selling it right away on another exchange at a higher rate. However, the possibility for crypto arbitrage is real because of the differences that various market exchanges have for identical currencies. Rather than finding ways to practice arbitrage, I started wondering if I could “see into the future” of one exchange that may be lagging behind another exchange. I know that exchanges do not exactly work that way, but I wondered if a pattern could be observed? If I could find a predictable pattern out there, then I could start making some very serious profit with very little risk in day trading.
Here is my summary or what I learned and what happened:
- Two reliable market watches I found were livecoinwatch.com and www.cryptoprices.com. However, I discovered that for the altcoin (OXT) I was wanting to sell, www.coincodex.com was by far the most reliable (at least all of yesterday evening). This will be my go-to market watch for now.
- There are too many variables to simply say that coincodex will always steer me in the right direction, but for this one trade, by comparing it with my exchange, I was able to predict that my altcoin was going to go up about several percentage points. I watched it. I knew where it was going to peak. I executed the trade. By waiting an extra 20 minutes or so, my profit increased by about 15%. Nice. Perhaps I got lucky, but I don’t think so. Now I will leave my earnings from OXT in DAI for a while before buying it or another coin on a big dip.
- I will commit to studying the data over a period of time. I am no expert, but I do know how to do research. I have two graduate degrees that involved lots of research.
- I will publish more on this journey and keep you all posted if there are any significant findings.
As always, buy, sell, trade, and exchange at your own risk. I am only sharing my personal and non-professional opinions.
Follow this blog if you want to hear more about this exciting and interesting observation.
Some of my trusted referrals:
https://www.coinbase.com/join/snuffe_p
http://cointiply.com/r/0j2x5
https://www.kucoin.com/ucenter/signup?rcode=rJEJW55
https://presearch.org/signup?rid=2332071
Be safe,
Crypto Lynx
