Is there a physical mechanism that determines and maintains the price of cryptocurrencies, be it a robot or a human? Let's say there is a price surge and the first buyer bought a crypto unit at $1. What would make the price click up to, let's say, $2? If there isn't some kind of a software mechanism that reacts to the purchase and increments up, everyone following the first buyer would just buy at $1, right? And why do different exchanges have slightly different prices at any given time?

And I am not talking about rates. A mechanism other than demand must change the price. Otherwise how can the range be so wild with relatively low activity? There must be an algorithm that responds to buys and sells.

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  • Voting to close as duplicate. The TL;DR is "there is no well-defined global exchange rate. People exchange at whatever rates buyes and sellers agree on". Nov 14 '17 at 21:05
  • I am not talking about rates. A mechanism other than demand must change the price. Otherwise how can the range be so wild with relatively low activity?
    – Bablo
    Nov 15 '17 at 6:12
  • There is no "the price". There are people who want to sell above a certain price, and people who want to buy up to a certain price. When a match between those is found, a trade happens. That's it, nothing else. "The price" that is often reported is usually a weighed average over the prices at which trades happened recently. Nov 15 '17 at 6:17
  • To some extent, the lower the activity, the more quickly the price can change. High activity leads to accurate price discovery. Low activity means that even a small buy or sell can move the price. Nov 17 '17 at 9:08

Supply X Demand, where they meet, is where the price is going to be, until either the demand surges ( higher price ) or lowers, ( lower price ).

The price will be where the 2 cross.

Exchanges have different volumes, and different people trading, people on exchange Y might value bitcoin different then the people on exchange X, So, they will trade at a higher price.

As a result the other markets/exchange X will either adapt, ( through things such as arbitrage )

Basic economics really.

Possible duplicate of How is the exchange rate for Bitcoin established?

  • I think I understand the supply and demand part, as well as the average between the high and the low. However, how can demand alone change the price? Let's say there is a brand new currency in the crypto world, and assume that I have $1 billion dollars with which I purchase 1 billion coins at $1 each. If some mechanism doesn't respond to my massive purchase in some way, all of the following buyers would continue buying at $1/coin, right?
    – Bablo
    Nov 14 '17 at 20:52
  • You state understanding supply and demand, then show you don't. If you bought 1 billion coins at $1, then there would be 1 billion coins fewer for all other users. If the total cap is 100 billion, then you have effectively gained 1% of the total supply. If everyone wants the coin, then the remaining 99% will be more expensive, unless there are 99 people remaining, each wanting exactly 100 billion. If there are 100 people remaining, then 1 is going to want to pay a little more to buy them, inflating the price. Nov 15 '17 at 8:47

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