XRP's Coinbase 'discount' on Nov. 2 was mostly a stablecoin illusion
Once USDT prices were converted into dollars, XRP's apparent Coinbase discount at the Nov. 2 close shrank from 0.168% to 0.006%.
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Key takeaways
- At the Nov. 2 close, XRP looked 0.168% cheaper on Coinbase than elsewhere.
- That gap came from comparing dollar prices with USDT-quoted prices.
- After converting USDT into dollars, the gap fell to 0.006%.
- The market value of XRP was effectively identical across venues.
XRP looked cheaper on Coinbase at the Nov. 2 close. It wasn't. An independent comparison found the gap shrank from 0.168% to 0.006% once USDT prices were converted into dollars.
What happened
Coinbase quotes XRP in dollars. Plenty of other venues quote it in USDT, the Tether stablecoin. Line those two prices up and Coinbase seems to trade at a small discount. About 0.168% at the close.
But USDT doesn't always equal exactly one dollar. Adjust for that and the gap nearly vanishes. The 0.006% left over is noise. XRP's market value was effectively the same everywhere.
The catch for traders
A raw price gap can be a unit problem, not an opportunity. Eyeing a spread between a dollar pair and a USDT pair? The stablecoin's own price is part of the trade.
Why it matters
People love to read small gaps between exchanges as weak demand or a premium. Here, that read would've been wrong. Before you treat a cross-exchange gap as a signal, or an arbitrage chance, check what each price is quoted in. A 0.168% gap sounds like something. It was nearly nothing.
Source: CryptoSlate
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