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What is the value of a Bitcoin?
The simple answer is that a Bitcoin is worth the amount someone is willing to pay for it at that moment. When you see a news headline like, “Bitcoin Reaches $1,000″ all that means is that someone, somewhere bought a Bitcoin for $1,000.
Why are there so many different Bitcoin values?
Thousands of entities have sprung up to bring buyers and sellers together to help facilitate the buying/selling of Bitcoins and other alternative currencies. These entities are known as exchanges. Every time someone buys/sells Bitcoin on their exchange they report the price.
Here’s a few examples of exchanges and their most recent bitcoin value.
| Bitstamp | BTCe | LocalBitcoins | MtGox |
|---|---|---|---|
 | | | |
Why are the Bitcoin values so different?
There are many reasons the prices are different across the exchanges. Each exchange has different amounts of supply and demand which gives them different amounts of liquidity. Each exchange charges different fees which plays a role in how Bitcoin is valued on that exchange. And different exchanges offer different tools and levels of security which is also factored into the price.
So why not buy low on one exchange and sell high on another?
You can try, but its likely that the fees and taxes of buying on one exchange, transferring to another exchange and selling over there will eat up all your profits. The markets are incredibly efficient.
Is this valuation system unique to Bitcoin?
Not at all! The stock market is a similar type of exchange except it deals in stocks, not Bitcoin. The primary difference is that a stock “lists” on an exchange meaning it can only be traded on that exchange. Bitcoin is a currency and is not bound by similar rules. Therefore, it can be traded on an infinite amount of exchanges.
