# Cross-exchange Price Spread

Also known as: exchange premium, Coinbase premium, Kimchi premium, cross-exchange spread, arbitrage spread.
A Breadth, Sentiment & External Data concept (Crypto-native) in the LuxAlgo Library.

## What is a cross-exchange price spread?

A cross-exchange price spread is the gap between the prices of the same asset on two trading venues, charted as a premium or discount and read as a sign of where demand is concentrated. Crypto produced the best-known named versions: the Coinbase premium, which the data firm CryptoQuant defines as the gap between Bitcoin's USD price on Coinbase and its USDT price on Binance, and the Kimchi premium, the gap between South Korean exchanges and international ones. In spot forex the same effect appears as broker-to-broker quote differences.

In a frictionless market, arbitrage would close these gaps within moments. They persist because moving capital between venues is slow and costly: transfer times, withdrawal limits, fees, identity checks and, in some countries, capital controls. Igor Makarov and Antoinette Schoar's 2020 study in the Journal of Financial Economics found recurrent arbitrage gaps in crypto that were much larger across countries than within them and tended to open during rapid bitcoin appreciation, consistent with capital controls slowing arbitrage money.

That friction makes the spread readable. A venue whose price persistently runs above the rest is where demand is concentrated: a positive Coinbase premium is commonly read as US-based spot buying, while a wide Kimchi premium has accompanied bouts of Korean retail enthusiasm. One detail matters: a USD pair compared with a USDT pair folds the stablecoin's own deviation from one dollar into the premium, so convert both legs to one currency first.

## How it's calculated

The premium of venue A over venue B, plus the cross-venue range used when many venues are compared.

```
Premium_t = 100 × (P_A,t - X_t × P_B,t) / (X_t × P_B,t)
Range_t = max(P_k,t) - min(P_k,t), over venues k = 1..m

  P_A,t: price of the asset on venue A at time t
  P_B,t: price of the same asset on venue B at time t, in B's quote currency
  X_t: rate converting B's quote currency into A's (USDT to USD, KRW to USD); 1 when they match
  Premium_t: premium of A over B in percent; negative is a discount
  P_k,t: price on venue k at time t
  m: number of venues compared
  Range_t: highest minus lowest venue price at time t, in price units
  t: time index (bar)
```

Sample every venue at the same timestamp; thin venues print stale quotes that look like premiums, and small intraday gaps are mostly fees and latency.

## How traders use it

- Demand attribution: in a rally, traders check whether the Coinbase premium is positive (spot buying on a US venue leading) or negative (the move driven offshore), reading [futures basis](https://www.luxalgo.com/library/concept/futures-basis/) and the [funding rate](https://www.luxalgo.com/library/concept/funding-rate/) alongside it to separate spot demand from leverage.
- Froth gauge: a premium widening on a retail-heavy venue marks crowded local demand; the Kimchi premium ran well into double digits around the 2017-2018 peak.
- Stress detection: one venue drifting away from the rest can be the first visible sign of withdrawal problems or a stablecoin losing its peg.
- On LuxAlgo charts: the Arbitrage Detector tracks one asset across up to 19 crypto exchanges or 13 forex brokers, plotting the highest-minus-lowest venue price graded by percentile, and the Arbitrage Matrix lays out every venue pair's price difference in one grid.

## Exchange premium vs related spreads

- **Futures Basis** (https://www.luxalgo.com/library/concept/futures-basis/): Basis compares a derivative with spot for the same asset and converges by design, at expiry or through funding. An exchange premium compares spot with spot and closes only as fast as arbitrage capital can move.
- **Cross-instrument Composition** (https://www.luxalgo.com/library/concept/cross-instrument-composition/): The umbrella for any series built from several instruments. An exchange premium is the special case where both legs are the same asset, so the gap measures venue friction and local demand rather than a relationship between assets.
- **Ratio/spread Charts** (https://www.luxalgo.com/library/concept/ratio-spread-charts/): These compare different instruments, such as gold against silver, where the gap carries economic meaning and can trend for years. A cross-venue spread compares one asset with itself, so a persistent gap points to friction or concentrated demand.

## FAQ

### What is the Coinbase premium?

The gap between Bitcoin's price on Coinbase's USD market and on Binance's USDT market, popularized by CryptoQuant. A positive reading means Bitcoin is pricier on Coinbase, commonly read as stronger US-based buying; part of any reading can be USDT's own premium or discount to the dollar.

### What is the Kimchi premium?

The premium at which crypto, Bitcoin above all, trades on South Korean exchanges over international venues. Restrictions on moving capital in and out of Korea make it hard to arbitrage, so it can persist for weeks and widen sharply in speculative phases.

### Can you profit from price gaps between exchanges?

Sometimes, but most visible gaps are what is left after costs: fees, transfer delays during which prices move, withdrawal limits, currency conversion and the risk of funds getting stuck. The largest gaps on a chart are often the hardest to capture; this concept treats the spread as information about demand, not as a trade.

## Related concepts

- Liquidation Clusters: https://www.luxalgo.com/library/concept/liquidation-clusters/
- Open Interest: https://www.luxalgo.com/library/concept/open-interest/
- On-chain Valuation Suite: https://www.luxalgo.com/library/concept/on-chain-valuation-suite/
- Crypto Cycle Models: https://www.luxalgo.com/library/concept/crypto-cycle-models/
- Exchange & Stablecoin Flows: https://www.luxalgo.com/library/concept/exchange-and-stablecoin-flows/
- Power-law Growth Curves: https://www.luxalgo.com/library/concept/power-law-growth-curves/
- Whale-wallet Tracking: https://www.luxalgo.com/library/concept/whale-wallet-tracking/
- Funding Rate: https://www.luxalgo.com/library/concept/funding-rate/
- Futures Basis: https://www.luxalgo.com/library/concept/futures-basis/
- Long/short Account Ratio: https://www.luxalgo.com/library/concept/long-short-account-ratio/

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Source: https://www.luxalgo.com/library/concept/cross-exchange-price-spread/ (LuxAlgo Library, the encyclopedia of trading & technical analysis). Free to use with attribution: https://www.luxalgo.com/library/license/