Arbitraging in Cryptocurrency Industry

What is cryptocurrency arbitrage?

Crypto Arbitraging means trading crypto assets from different exchanges to exploit their price differences and use them to your advantage. It makes traders earn money in the crypto market inefficiency.

There are several opportunities in crypto arbitrage as there are over two hundred (200) exchanges where crypto-assets can be purchased or sold. Also, not all arbitrage traders are in the crypto industry, making the crypto space less competitive, unlike the traditional stock market.

As we have these advantages, there are also limitations which include but not limited to fees, hacking risks, timing, and also KYC.

As a trader, you need to initiate the trade instantly. If not, you might end up losing when the market price fluctuates.

Types of Arbitraging

There are various types of crypto arbitrage which include but not limited to; Risk, statistical, triangular, automated, and regular arbitrage.

The most common types of arbitrage strategy are triangular arbitrage (arbitrage within an exchange) and arbitrage between exchanges.

Arbitrage within exchange (Triangular arbitrage) occurs on a single crypto exchange. A situation where a trader exploits the differences in the price of 3 cryptocurrencies through several conversions to make a profit.

Read Also: Ethereum-based Swap DODO has been Exploited and Drained of $3.8M 

Arbitrage between exchanges involves taking advantage of varying prices of assets on different exchanges.

How to Make Money with Crypto Arbitrage?

Checking out opportunities between exchanges, taking a drastic decision to buy on a platform that offers a lower price, and selling the coins/tokens purchased on the crypto exchange with a higher price to make profits.

It takes less than 30 minutes for top coins and exchanges to confirm transactions. If there is a decline in the asset price within this time frame, there will be risks of making less arbitrage profit.

When carrying out the crypto arbitrage, ensure that you don’t ruin things. Be very careful with your trading analysis on the exchanges. Also, have a view of the coin’s trading volumes.

This concept looks easy to implement, but transaction speed and timing are factors that make arbitraging tedious.

What do you think? Share your comment below.

Comments (No)

Leave a Reply