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he original question was from user Poryhack:
“As I write this, the difference is a little over $8 but I’ve seen well over $10 in the last few days. What’s causing this? Why isn’t arbitrage bringing the two closer together like they’ve been in the past? The two are more or less tied for volume so that can’t be the issue.”
Raphael chimed in and commented under his reddit username Raphael_Bitfinex:
“I’ll try to answer here. We used to include the Bitstamp order book into our own order book for liquidity purposes. In other words, we were arbitraging between our own platform and Bitstamp. However, as we continue to grow we decided to slowly, and I insist on slowly, withdraw this arbitraging program to let people do the arbitraging themselves. This is why you started to see the difference between the price on our platform and Bitstamp, as arbitraging for third parties is interesting only after a certain threshold.
Furthermore, you will notice that our price is actually very close to Chinese exchange’s prices, and follows them closely. There is a reason for this of course, but this probably explains the difference and maybe the “bullishness” of a lot of our users.
I know this new difference raises questions, but this is part of evolution toward being a more independent exchange.”
It seems as though Raphael is looking to further his 2012 platform, Bitfinex, from Bitstamp for reasons of independence. Bitfinex has been progressing toward independence for a while, and they were able to pass a Proof of Solvency audit performed by Stefan Thomas, CTO of Ripple Labs.
The future move of distancing themselves slowly from Bitstamp will lead to, hopefully, great competition between the two. The competition will force each company to provide a better service to their customers, with the end users benefitting from the improvements. As the two exchanges move forward, it will be incredibly interesting to see how they shape themselves independently.
Ever since the Mt. Gox meltdown, Bitcoin users have been reasonably skeptical of all Bitcoin exchanges. They’ve began pressuring exchanges to pass a Proof of Solvency audit, starting with Kraken passing the first ever “crypto-audit” last March.
However, an audit is not flawless. When Stefan Thomas passed Bitfinex, he said, “An audit does not constitute an endorsement and it does not address any risks outside of present insolvency. It’s also not infallible; exchanges can borrow money or ask others to sign their audit message.”
Bitstamp also passed a Proof of Solvency audit performed by former Google engineer Mike Hearn. They made a self-to-self transaction and gave Hearn their private key to cold storage access. Through this process, Bitstamp was able to prove that it controlled all 183,497.40310794 BTC in their reserves.
Featured image by Shutterstock.
Last modified (UTC): June 13, 2014 04:25