By Frank Chaparro

A trader from BGC, a global brokerage company in London’s Canary Wharf financial center, seen in 2016 after Britain voted to leave the European Union. Russell Boyce/Reuters

The price of bitcoin varied wildly in December, but things have calmed down in the new year.
That means crypto traders are making less money from taking advantage of different prices on different exchanges.

The crazy-good times for cryptocurrency traders may be over already.

December was a huge month for cryptocurrency trading. Bitcoin hit its all-time high above $19,000 a coin, and daily volumes for crypto trading soared over $50 billion for the first time. It was also a golden age for arbitrage trading.

Arbitrage is when a trader buys an asset trading in one market at a lower price and then sells it at a premium on another market. During bitcoin’s run-up toward $20,000 (and subsequent sell-off) in December, bitcoin was trading at wildly different prices on the main US exchanges.

The spread, or price difference, between the GDAX and Kraken exchanges was more than $1,000 on December 10, according to data provided by CoinRoutes. For much of December, bitcoin was trading at a big premium on GDAX compared with the other US exchanges, and spreads north of $500 between some exchanges were very common.

The new year, however, has ushered in an era of much tighter spreads between the main US exchanges.

“GDAX is more or less normal, and there is no obvious exchange driving the price higher,” Dave Weisberger, the CEO of CoinRoutes, told Business Insider

The question is whether these spreads will blow out again the next time there’s another bout of wild volatility.

“Volatility has been relatively lower — often arbitrage opportunities appear when the market is in a big rally or sell-off,” Garrett See, the CEO at DV Chain, a cryptocurrency trading firm, told Business Insider.

But John Spallanzani, a trader who is set to join Miller Value Partners, told Business Insider that the December golden age of arbitrage trading was unlikely to return.

“We may not see the huge spreads between countries and exchanges that we saw in 2016 and 2017 ever again,” Spallanzani said.

“That arb boat has set sail,” he said.

That’s not to say that crypto markets are suddenly all in sync. But things are much more muted. More often than not, there’s a $100 spread, according to Weisberger of CoinRoutes.

“Prices across the cryptocurrency market tend to be dislocated and fragmented,” Bobby Cho, the head of OTC trading at the cryptocurrency trading firm Cumberland, said of the current environment. “If you ask 10 different people about the price of some of the most liquid cryptos, like bitcoin or Ethereum, you will still get different answers.”

Still, capitalizing on arbitrage opportunities is sometimes easier said than done in crypto, which is known for its immature market infrastructure. If two exchanges show different quotes, it is for a limited quantity and depends on whether a trader can access the exchange and the trade settling.

Exchange latency, the speed at which information is communicated between exchanges and trading firms, is far slower in crypto than it is elsewhere on Wall Street.

Correction: An earlier version of this article identified Garrett See as the CEO of DV Trading. He is the CEO of DV Chain, a division of DV Trading.

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