Solidi’s Pricing Explained

We’re always trying to be as transparent as possible with how Solidi works. Recently we’ve had a number of questions about how the pricing works and in particular why the price per coin can sometimes change.

The Marketplace and the Orderbook

The most important thing to know is that Solidi operates a free marketplace with an orderbook. We don’t set the prices – our brokers do.

As a result there is no single “fixed” price. Solidi will always give you the best price possible based on the amount you are looking to purchase.

Order matching – giving you the best price

When you enter an amount, or change the amount, we re-quote based on the new amount to ensure the best price. This will often lead to you matching against different brokers selling at different prices.

For example, if the orderbook contains the following SELL orders (ordered by price):

Order ID Amount Price Broker
1 0.1 BTC 5000 Broker 1
2 0.2 BTC 5010 Broker 2

If you enter a BUY of 0.1 BTC you match against Broker 1 and get a price of £5000 / BTC.

If you increase the buy to 0.2 BTC you then match against Broker 2 and the price increases to £5010 / BTC.

If you then increase to 0.3 BTC you wouldn’t be able to match against any broker as that would require you to send payments to multiple people – which would be confusing and complicated.

Fair Pricing

The model gets more complicated as brokers sometimes have multiple orders in at different prices. If we look at our previous example and add a third order in from Broker 1 things get more complicated.

Order ID Amount Price Broker
1 0.1 BTC 5000 Broker 1
2 0.2 BTC 5010 Broker 2
3 0.1 BTC 5030 Broker 1

When you buy 0.13 you will match against order 1 and order 3 – so your price will be:

 0.1  * 5000 = £ 500.00
 0.02 * 5030 = £ 100.60
       Total = £ 600.60   (£ 5005.00 per BTC)

And if you increase the BUY to 0.14 then it becomes:

 0.1  * 5000 = £ 500.00
 0.04 * 5030 = £ 201.20
       Total = £ 701.20   (£ 5008.57 per BTC)

Notice the price per BTC has increased from £ 5005 to £ 5008?  Unfortunately as the supply of cheap BTC from Order 1 has been exhausted then every increase in the quantity will be taken from the 3rd order price at £ 5020 and the average price will slightly increase, until…..

Ensuring Fair Order Matching

Once you enter a purchase quantity of 0.15 or greater the average price for the BTC passes £ 5010 and so the second order from Broker 2 will become cheaper. So if you enter 0.16:

 0.1  * 5000 = £ 500.00
 0.06 * 5030 = £ 301.80
       Total = £ 801.80   (£ 5011.25 per BTC)

This is more than the cost of matching with Broker 2, so Solidi will match you with broker 2 and you get a price of:

 0.16 * 5020 = £ 803.20
       Total = £ 803.20   (£ 5010.00 per BTC)

Solidi’s orderbook has many more orders and brokers in it, but our matching engine will always ensure you get the best price possible.

Order Restrictions

This blog post doesn’t cover order restrictions. Order restrictions are limitations brokers can apply to their orders. For example some brokers may limit to only selling to ID Verified users. Some brokers may put a minimum amount that they will sell – say £500 – which means unless you are buying £500 or more you won’t have access to their order.

Order restrictions are a complex topic so we will discuss them in a follow up blog post.

More Questions

Q. Why does the price increase the more I buy?
A. In general you get the best price available regardless of how much you buy. As such, as soon as you’ve been allocated all the cheapest BTC at the top of the orderbook, the only option is for you to be allocated the next cheapest BTC – which causes the price to rise. (see the example above).

Q. But surely the more I buy the cheaper something gets?
A.  In traditional buying and selling, prices usually get cheaper the more you buy of something due to the reduced impact of a hidden ‘cost per transaction’, such as processing payments, packaging, delivery etc. The traditional ‘bulk buying’ cost reduction occurs as this ‘cost per transaction’ is spread over the amount you buy and thus the overall cost goes down. Because Solidi is entirely automated, there is no significant ‘cost per transaction’ and so all you are paying is the cost per BTC – which is already as low as our brokers can go.

Q. Why can’t I match against multiple brokers?
A. If this happened you would have to send a payment to each broker you matched with. In our simple example above this would be two brokers, but on the actual Solidi orderbook this could be many more.

Q. Why are brokers allowed to enter different priced SELL orders.
A. This encourages brokers to provide lower pricing – it enables them to sell some of their BTC at lower prices without requiring to sell all at a lower price. This increases competition and overall lowers pricing. It’s the way all Foreign Exchange plaforms work.

More questions? Add them into the comments and we’ll update the article.

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