{"id":6054,"date":"2021-04-19T15:11:14","date_gmt":"2021-04-19T08:11:14","guid":{"rendered":"https:\/\/news.bitcoinvn.io\/?p=6054&lang=en"},"modified":"2024-05-13T07:40:47","modified_gmt":"2024-05-13T00:40:47","slug":"why-is-crypto-in-vietnam-so-expensive","status":"publish","type":"post","link":"https:\/\/bitcoinvn.io\/news\/why-is-crypto-in-vietnam-so-expensive\/","title":{"rendered":"Why is Crypto in Vietnam so expensive?"},"content":{"rendered":"

As many new market participants enter the crypto markets over the past previous weeks, one of the most common questions which arises is:<\/span><\/p>\n

<\/p>\n

\u201cWhy the hell is crypto so expensive in Vietnam? Are you ripping me off?!?\u201d<\/span><\/i><\/p>\n

\"Newcomers
Newcomers to the crypto markets in Vietnam ain\u2019t pleased!<\/figcaption><\/figure>\n

The confusion usually stems from comparing international (western) market prices to the local market prices in Vietnam, which at times (especially in recent weeks) trade at a significant premium.<\/span><\/p>\n

Inexperienced users often compare Google, XE or other conversion calculators to determine the supposed price of Bitcoin, USDT, Ethereum etc. – which source their data feed from the official rate provided by <\/span>Vietnam’s Central Bank<\/span><\/a>.<\/span><\/p>\n

\"This
This is the official rate following the central bank. It is *not* the real market rate of the VND<\/figcaption><\/figure>\n
\"USDT
USDT rate on the same day on another P2P platform in Vietnam – displaying the actual market value of the VND<\/figcaption><\/figure>\n

So why are there these differences in the rates and what are the reasons for the spread between official and market rate?<\/span><\/p>\n

First let\u2019s look at the definitions:<\/span><\/p>\n

Official rate<\/b><\/h2>\n

Provided by the country\u2019s Central Bank<\/span><\/p>\n

Basically the board of governors of the central bank decides by decree what the rate is supposed to be.\u00a0<\/span><\/p>\n

Oftentimes the official rate is close to the actual value of the currency in the market and the central bank possesses certain levers to get the official and the market rate closer in line (e.g. working with their Forex reserves to drive up\/down the value of the domestic currency in the marketplace).<\/span><\/p>\n

In case of a <\/span>non-free floating currency<\/span><\/a> regime, divergences between the official and the market rate may occur if the central bank interventions prove insufficient to close the gap between officially proclaimed exchange rate and the actual exchange rate of the currency in the open marketplace.<\/span><\/p>\n

Market rate<\/b><\/h2>\n

The actual exchange rate of the currency determined by participants in the marketplace.<\/span><\/p>\n

It does not matter if the official exchange rate of currency A to currency B is proclaimed to be 10:1 by the central bank.<\/span><\/p>\n

If the participants in the marketplace decide that the purchasing power is actually smaller; e.g. 15:1, then this is the price you get if you participate in the marketplace.<\/span><\/p>\n

The places who would still offer the official rate of 1:10 would be sold out and bankrupted in very short order.<\/span><\/p>\n

This happened e.g. when the <\/span>US bankrupted itself in the late 19th century<\/span><\/a> when they tried to<\/span> implement a fixed currency exchange rate between silver and gold<\/span><\/a> which did not reflect the actual market rates.<\/span><\/p>\n

\"A
A fixed exchange rate which does not reflect the actual exchange rates won\u2019t persist for long – shrewd speculators will bankrupt the counterparty in short time<\/figcaption><\/figure>\n

Any free arbitrage between official and actual market rate won\u2019t last for long since the market participants offering the official rate will be bankrupted by arbitrageurs who take advantage of the differences between official and market rate.<\/span><\/p>\n

Vietnam is not alone with a local a Bitcoin premium<\/b><\/h2>\n

Just some of the other recent examples where the official rate set by the central bank does not reflect the actual value of the underlying fiat currency:<\/span><\/p>\n