Handre van Heerden
2 min readFeb 20, 2023

How you should think about it, but probably don’t.

Its Monday morning, you open up your favourite financial website or app, you immediately scroll down and check the latest price movements of your investments.

What are you actually looking at?

The price displayed is straight forward for some assets. Shares in most companies are traded on a single exchange, maybe two exchanges. That is the only place where you can trade this security and thus the price on that market is the only price for that security.

Some other tradable assets like Bitcoin, gold, silver, oil (most resources) are traded around the world on many different exchanges, in many different markets, in many different jurisdictions and in different currencies.

Let us look at gold for example. You can look at the COMEX price for gold and accept that that is the current gold price, but is it actually the predominant price for gold?

You might be able to purchase gold for cheaper at a souk in Dubai, or even cheaper next to a rural gold mine in the Congo. Gold might be much more expensive to purchase in a country experiencing hyperinflation or capital controls.

The same goes for Bitcoin, except it is much, much easier to transport Bitcoin around the word and thus easier to arbitrage this effect into oblivion.

Wouldn't it be a better representation of reality to consider the average price paid for such an asset around the world, rather than considering only the price paid for it on your preferred exchange?

The answer is yes and no. No, the price on the exchange you are using is the only one that matters to you, except if you are explicitly arbitraging.

Yes, from an analytical point of view it is a much better holistic way to look at pricing, and simply being aware of this would already help you see the bigger picture. The price of your asset in other markets might even be a leading indicator serving as a warning or a promise of opportunity.