Comment by snake_plissken | Hacker News Reader

Comment by snake_plissken | Hacker News Reader

Can someone confirm or better explain how Mt Gox's relatively longer amount of time to process USD withdrawal requests is causing there to be a premium over other exchanges quoted USD/BTC?

This is how I understand it: people already have dollar denominated accounts with Mt Gox, either by selling BTC on Mt Gox or depositing money there. They want to get these dollars out, but since it takes so long for Mt Gox to process these transactions and complete the requests, people are buying BTC on Mt Gox and transferring them to other exchanges that can process the withdrawals in a quicker fashion. This is in exchange for a discount on the USD/BTC rate they will get, i.e. they will lose the premium offered by Mt Gox so that a dollar denominated withdrawal request will happen more quickly on another exchange. The net result is a higher demand for Mt Gox BTC offers, and the premium results.

The answer is simpler than that. The issue has nothing to do with Bitcoins.

This is an issue with USD (as dollar bills in your pocket or in a bank account) and MTGXUSD (as dollar units in a Mt Gox account). MTGXUSD are worth less than USD because of two factors; one is potential regulatory issues, and the other is that you are buying future dollars, which are cheaper than right now dollars.

Because MTGXUSD are cheaper than USD, you need more of them to buy BTC, and thus the price differential.

I understand it as buying on Mt Gox is a premium over the other exchanges because of safety. BTC-e is based in Bulgaria, won't release their company information, and could close doors at any time and disappear with everyones BTC- so it trades at a lower price there because of the extra risk.

Mt Gox is based in Japan, and very public about operations.

I'm going a bit off topic here, but one of the major weaknesses I see of Bitcoin are the exchanges. For the currency to survive, in the way it was intended, I think there needs to exist a decentralized exchange as secure as Bitcoin itself. If someone wants to work on this, shoot me an email.

Mt Gox is acting like a futures market.

Many people invest dollars into Bitcoin because they believe it will increase in dollar value.

If they exchange their Bitcoins for dollars at Mt Gox, they know they will have to wait to get the dollars. They believe that, while they are waiting, the value of Bitcoin will probably rise. So they demand the expected future value of their Bitcoins, not the present value.

Correct

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