Question: How Does Coinbase/GDAX Come Up With A USD Price for Litecoin & Ethereum?
Hey guys, hoping you can help me wrap my head around this. So when trading in Bittrex you pretty much have to get the idea of US Dollars out of your head. When Bittrex shows a USD price it can look as if you are up money, but in reality you need to look at Bitcoin because it can look as if you are up USD however if Bitcoin price has also gone up you may actually wind up with less Bitcoin when you sell.
When I trade on GDAX while I can choose to trade in BTC/LTC or BTC/ETH pairs, however I also have the ability to trade in US Dollars against LTC or ETH. My questions is where/how does Coinbase get the USD price? Where does the USD price in relation to Bitcoin or Litecoin come from? How they do arrive at that figure?
I find it easier to figure out profit or loss as well as wrap my head around trading in relation to USD as opposed to BTC as there seems to be less moving parts to try to figure out profit and loss.
Hopefully this question makes sense lol
I think it's just based on who is selling ltc/btc and who is buying the same. That's why coinbases value could be different than bittrex. People on Coinbase may be willing to buy bitcoin with their Litecoin at a higher price than another exchange, because each exchange is separate. So each exchange really has its own market. Hope that kind of makes sense.
Hey @bitcointycoon thank you for your comment. Now that you say that it's fairly obvious to me ie if I place a buy order and someone else places a sell order the price is where we meet in the middle so the market is actually determining the price. Your right as well lately I've been seeing some potential arbitrage opportunities between marketplaces as buyers and sellers on Bittrex are a completely seperate pool and a completely seperate market than buyers and sellers on GDAX
Yeah, seems like if you had money on the US exchange and money on an Asian exchange you could buy from the cheaper one and sell on the more expensive one. I've thought of that too, but I haven't tried it.
Good question that I would also like to know!
Maybe the difference has to do with the difference between the bid and ask prices?
I'm having a hard time even getting out verbally what I'm trying to ask but with Bittrex and trading pairs you kind of have two moving parts Bitcoin price since you eventually have to go back into Bitcoin as well as the price of whatever coin your messing with.
With Coinbase your going USD to Litecoin for example so you really only have one moving part Litecoin. I guess I'm asking where does Coinbase come up with the Litecoin price. Are they just converting the BTC/LTC price for you and turning it into dollars so it's easier to wrap your head around?
I personally would imagine it's either based on the order book, or just a real time conversion from whatever currency into USD based off global markets.
It is all just based on what someone is willing to buy it at. Like if someone has their money over there and the price looks acceptable to them they just purchase at that. If they think it is too high then they don't purchase.
It is all just dictated by the people on that market. With Bittrex they are just using some average of a bunch of exchanges to give an estimation of what it may be worth.