Price Convergence

Price convergence is the process where the prices of the same asset across different markets move toward a single, unified price. This is driven by the activities of arbitrageurs who buy in cheaper markets and sell in more expensive ones, thereby eliminating price discrepancies.

In a well-functioning, efficient market, price convergence happens almost instantaneously. However, in fragmented markets like cryptocurrency, price convergence can be slower due to latency, transaction costs, and liquidity constraints.

Price convergence is a key indicator of market maturity and integration. When prices converge, it signifies that information is being incorporated efficiently across all venues.

This process is essential for maintaining a fair and consistent market environment for all participants. Factors that hinder price convergence, such as capital controls or lack of liquidity, can lead to persistent mispricing.