What is crypto arbitrage?
Cryptocurrency investment is becoming more and more popular and there are many ways to do that. Crypto arbitrage is one of them. If you are new to this, there are a few things you might want to know, before you get started.
At its basics, crypto arbitrage is making profit from the different prices that cryptocurrencies have at different exchanges. You can do crypto trading between one or more exchanges or do a triangular arbitrage.
To be more specific, cryptocurrency arbitrage involves buying a cryptocurrency on one exchange and then selling it on another exchange, at a higher price. This is one way of making profit from crypto arbitrage.
Speed is one of the most important factors which affects the crypto arbitrage process as a coin can be available on different crypto exchanges, at different prices for a very short period of time. To make a profit, you should take advantage of this and buy the coin at the lowest price and quickly sell it on the exchange for a higher price.
Types of crypto arbitrage
There are different types of cryptocurrency arbitrage, depending on the strategy and actions you are willing to take.
Spatial Arbitrage - This is an arbitrage between crypto exchanges, where you buy crypto on one exchange and sell it to another. One of the main problems of this type of arbitrage is that the transfer can take longer and the fees can detract from your profits.
Cross - border arbitrage - As the name suggests, this type of crypto arbitrage takes place on exchanges in two different countries.
Decentralized Finance Arbitrage - This crypto arbitrage strategy uses DeFi - a financial protocol, working as an exchange, stablecoin, and lending protocol. Protocols find the best yield while users rely upon the security provided by smart contracts.
Flash Loan Arbitrage - Here you use instant cryptocurrency loans that let you borrow large quantities of crypto without collateral.
Statistical Arbitrage - This method lets you use a crypto arbitrage bot to trade the cryptocurrency. Here you can trade hundreds of cryptos simultaneously and the bot uses a math model for determining the chances of profits.
Triangular Arbitrage - This type of arbitrage involves one exchange and three cryptos. One of the pros here is that you don’t have to worry about fees and time spent transferring, as it all happens on one exchange.
Cryptocurrencies arbitrage regulations
Crypto arbitrage is a subject to regulation which depends on different global jurisdictions. So before you take any action, you need to be aware of the current status of digital assets in your region.
There are plenty of trading platforms and tools, and before you choose one, you must ensure that the provider is trustworthy. We suggest you entrust your funds and data only to a licensed and regulated company.
Crypto Arbitrage risks
Small gains without high volumes - If you want to gain profit from crypto arbitrage, you need to have a higher volume of crypto. As you can see, crypto arbitrage can give you small profits for each arbitrage opportunity.
Fast movement - If you really want to invest in crypto arbitrage, you need to act fast. As we mentioned, prices move very quickly, and good opportunities can disappear within seconds.
Slippage - If your order is bigger than the order book’s cheapest offer, you can pay more than expected. You end up buying or selling at different prices than intended, which can reduce or eliminate your profits.
Fees - If you choose cryptocurrency arbitrage between different exchanges, you would have to deal with transfer fees and that would definitely have an impact on your profit.
Security - If you are familiar with cryptocurrency exchanges, you probably know that they are a risky place to keep you crypto. Of course, if you have your crypto on one or more exchanges, that will increase the chances of bigger profit, so all you need to do is balance the risk with the potential profit.
Advantages of Automated Crypto Arbitrage
One of the main advantages of automated crypto arbitrage is that it does the hard work for you. The algorithm scans different exchanges, monitors hundreds of cryptocurrencies, identifies and exploits them before the price is changed.
Automated Crypto Arbitrage lets you do a large number of trades at the same time, and it will do it as fast as possible.
Automated arbitrage does not need you to be a financial expert, it doesn’t consume time in researching price differences or trading activity. You don’t have to spend hours in front of the screen, as the system will do it for you.
CryptoArbi is an arbitrage platform that will help you make profit from the crypto price differences. You just have to choose the right subscription plan, and we will work for you.
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