> I'm puzzled by the big spread between Mt. Gox and the other exchanges. For the last week, Mt. Gox has been running about 5 USD above the other exchanges, even though you can't get USD out of Mt. Gox.

Imo it's because traders can't complete an arbitrage trade to bring the prices back into line.

The abstract idea is that, in order to bring the price of BTC relative to USD down, there must be at least the potential for a flow of trades that exchange BTC for USD, and continue on from there to do other things elsewhere in the economy. This flow is blocked at gox, however, because with USD withdrawals on hiatus, there is nowhere for that USD to go. In the other direction there is no block, because you can withdraw BTC. So, because of the uncompensated USD->BTC flow potential, there is an uncompensated upward pressure on price of BTC at gox.

More concretely, let's say that you are a trader with an account on both Mtgox and on Campbx. On each exchange, let's say your account value is half US dollars and half bitcoin.

Normally if you see the BTC/USD price on gox much higher than campbx, you would exchange BTC for dollars on gox and simultaneously exchange dollars for BTC on campbx. This trade has the effect of bringing the price of BTC/USD down on gox and up on Campbx, thereby reducing the price spread between them.

But after you do this, your account on gox is all in dollars, and your account in campbx is all in BTC. To complete the circle (that is, to return you to your starting point, plus profit), you need to transfer most of your newly acquired dollars from gox to campbx, and transfer most of your newly acquired bitcoin from campbx to gox. After you do that, if the prices are still out of line, you can repeat the arbitrage trade.

If USD withdrawals are on hiatus from gox, you can't complete the circle, and so you can only do this trade once. Assuming there is a fixed population of arbitrageurs on gox each with a fixed amount of money, eventually all of the arbitrageurs will run out of ammo and there won't be anyone still trying to bring the prices back into line in this fashion.

In addition, with USD withdrawals but not BTC withdrawals on hiatus, people who want to withdraw USD from gox immediately are forced to convert it to BTC, withdraw that to another exchange, convert that back to dollars, and withdraw from there. This exerts additional upwards pressure on the BTC/USD price on gox, and additional downwards pressure on the BTC/USD price on other exchanges.

If i were Mtgox, i would consider prioritizing the completion of the LARGEST outgoing wire transfers, in an attempt to bring the prices back into line (and to retain the business of large traders).

If gox gets their act together and starts processing wire transfers promptly, it will be interesting to see if this situation briefly reverses, due to a brief, massive flow of dollars out of gox.