“Why is there a difference between the actual Bitcoin price and the buying and selling price ?”
This might be sound a little odd, but
There isn’t any “ACTUAL” price for Bitcoin that justifies that Bitcoin is worth so and so.
The price of Bitcoin is a balance between what price someone is willing to trade with to part from the Bitcoin and what someone is ready to pay to acquire it.
In a simpler scenario between two people, where I’m trying to buy a house from, say Alex. I’d be looking to buy the house at the cheapest price that I can get and Alex would be looking to sell the house at the highest price that he could get.
Of Course, this transaction cannot happen if both of us stand our ground and refuse to come to an agreement. Say, this transaction is similar to majority of the transactions where I can afford to buy the house for a certain sum and no more than that, and Alex certainly does have a figure in mind below which he wouldn’t be willing to sell his house.
These are called upper and lower limits of what could be the value of the house in question. Once we have a clear picture of our upper and lower limits for this transaction, we can much easily decide on a price for the house that’s between our upper and lower limits of what we’re pricing the house at.
This is an example of how a transaction takes place between two people that come together to trade a house in exchange for a certain sum of money.
Now, Imagine a scenario with Millions bidding for the same house and then a Billion and then some more.
When we have so many people bidding for a commodity through a platform, the company in question prices the value of the commodity between what one is ready to pay to acquire it and the price at which the person in possession of the commodity is willing to sell it for.
In a transaction involving a house, there normally is a broker that acts accordingly to bring about this balance within which people are willing to trade.
A company acts as a price regulator to bring about a transaction between two people with commodities that they are willing to trade with a common interest to profit by taking a percentage of the transaction usually from the receiver, but in this scenario that involves Bitcoin, the sender usually pays a fee to the third party company.
Now, why do we see a price difference between the same Bitcoin that’s available on multiple platforms ?
Why Indeed ?
Bitcoin exchanges and companies that transact using bitcoins determine a lower and a upper limit around what a person in possession of Bitcoin is willing to sell it for and what a person is willing to pay in order to acquire it.
A price is finally determined after setting upper and lower limits between a seller and a buyer. A price is determined between the limits based on a pricing strategy that the company(exchange) employs.
This pricing strategy differs from company to company and could also manipulated if desired.
A company’s pricing strategy is dependant on its internal policies and long term plans.
A price that is deduced post analysis and coherently agrees with traders on the network is still subject to additional increase or decrease based on the country in which they operate, taxes and margin.
Albeit there are numerous factors that impact the difference in price of a distributed commodity such as bitcoin, most of the companies try to predict and justify an appropriate balance for their market as their reputation of being a reliable exchange depends solely on the nature of their trustworthiness.
There are numerous third party companies that analyse Bitcoin, stocks and other distributed commodities in general and conjure predictions based on algorithms and machine learning likely.
There isn’t a restriction that prevents Bitcoin exchanges from performing similar predictions and manipulating a biased market based on the information that they provide to profit off , but a moral one except if the government comes out with a law to govern activity as such.
Additional difference in prices might be seen if there are grave imbalances between groups leading to microeconomic differences where the companies might decide to offer Bitcoin at a higher price to profit off the difference between one microeconomy to another.
Example of Microeconomy Surcharge:
It is noticed that Bitcoin value in India is 5% to 10% higher than what’s available on the global markets. This is mainly because the demand in India is a lot higher than what can be perceived on a global scale or another microeconomy say, Venezuela where electricity is nearly free and it is a lot easier to acquire Bitcoin leading to a demand imbalance between different micro-economies.
What might appear to be a simple number to price a distributed commodity such as bitcoin is a lot of work and research that ought to be done previously.
It is always well recommended to check the prices on different reliable public exchanges for an accurate value of Bitcoin or Ethereum.
All the very best !
I do hope this was helpful :)
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