As Coinbase / GDAX went down this evening for scheduled maintenance, I wanted to test a theory regarding price changes when the exchange reopened. Since major cryptocurrencies are traded on a variety of exchanges that generally have very similar prices, I wondered if examining those prices could provide insight into the prices when GDAX reopened.
Below are images I created showing the price of Ethereum and Litecoin during the exchange and immediately after it reopened. On the right are the prices of the currencies on various exchanges as reported by Coin Gecko.
Litecoin
Ethereum
At the time of maintenance on GDAX, the prices for Litecoin and Ethereum were $253.42 and $533.41. Additionally, the price on other exchanges for Litecoin was $224 and $519 for Ethereum. Since the opportunity to resell their coins on GDAX at the higher prices presents users of other exchanges an opportunity for arbitrage, it follows that the price on GDAX would quickly mirror that of other exchanges. This is confirmed when you look at the price changes of the currencies when the exchange reopens. Litecoin fell to $240 and Ethereum fell to $525. While these are not fully in line with the prices on other exchanges, we were able to predict the general price direction.
The one exception to this was Bitcoin. However, the price on other exchanges did not vary greatly from the price of Bitcoin before closing, so the slight rise instead of fall is within normal inter-exchange price differences.
As this is the first time I have tried to examine this phenomenon, I am unsure if this is the normal behavior of the currencies, or if this was an exception. Obviously, I do not recommend using any of this as investing advice, but just view it as an interesting observation.
If anyone has observed this trend during other crashes/closings of exchanges, please share your experiences.
This is an interesting insight and i'm curious to see what happens next time these exchanges go down for maintenance!
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