Lack of Arbitrage Opportunities For Bitcoin Proves Scarcity

Im sure that you have seen a different quoted price on every exchange during this run up, but the biggest differences are occurring from country to country. This shows that right now there are still not enough arbitrage outlets or inlets to move into countries with newer bitcoin demand. The banking relationships with exchanges and simply the amount of coins in these various countries seems to be much smaller or those who have coins are not selling.

When we saw the run up back to 1000 a few months ago we saw the same thing happen with India, where bitcoin prices on certain exchanges were 30-40 percent higher than on western exchanges. That means it would have been worth it to literally buy from a western exchange , get on a plane to India and sell it on localbitcoins, which I would not be surprised if people actually did that. India’s biggest exchanges are more like coin suppliers, similar to coinbase, rather than actual exchanges like bitfinex which match a buyer and seller. This could have added to the price being pumped.

Today we are seeing the same thing happen in countries like South Korea and Japan, where the exchange price is still much higher than in the west. Countries with new demand and a very powerful demand at that, are trying to buy up as much as they can, but there simply isn’t enough in the country to supply them. This is why we are seeing crazy premiums again in countries where bitcoin exchanges haven’t completely setup the infrastructure to have arbitrage opportunities.

The most important thing that this shows though is how scarce bitcoin truly is, not just in terms of 21 million, but in terms of where people are holding it around the world. The biggest places that have the most bitcoin are the United States and China, and if other countries want to buy a large amount they will most likely be buying from a seller in those two places. Because of that, there is a severely constricted supply if a new country starts buying up a large amount. Hypothetically you could have one or two countries push up the price to a 100% premium.

If we continue with the current exchange infrastructure that operates on a country by country basis, we we will probably see another country rush to buying coins in the future and push up the price. We might have had a massive runup recently but after things settle down and we correct, in the grand scheme of things 90 billion dollars for a potential world currency or store of value is extremely small. Its smaller than the value of apple. Not to mention the market cap is actually smaller because it is counting coins that have disappeared forever. Im curious to see how the premiums hold and what will be the next country to try and buy a large amount of coins.