It is not a secret for anyone that cryptocurrencies are as interesting as they are volatile. At the same time, they are being widely adopted all around the world. Today, there are many exchanges offering crypto trading services. If you have already observed the prices of different cryptocurrencies, you have probably noticed that the prices from each exchange differ.
Here are the reasons why, and how you can profit from price differences:
One of the main reasons for crypto price differences is the liquidity level of each exchange. It depends on different factors, such as the Trade Volume. This, on the other hand, relies on the amount of investments, as well as the demand and supply for each coin.
There is a possibility that a given cryptocurrency is traded at $22,903.23 at exchange A, at $23,102.34 at exchange B, and at $21,123.10 at exchange C. In that case, you would definitely notice the difference. This, as you might guess, is a perfect opportunity to try an arbitrage strategy.
We have already talked about arbitrage strategies and the opportunities they give. They are utilized when there are price differences between exchanges. If we use the example from above, you can buy the coin from exchange C, and sell it on exchange B. The difference in the price is your profit.
What to consider when looking at crypto prices at different exchanges
Cryptocurrencies don’t have a fixed price
It is not a secret that cryptocurrencies differ from fiat currencies in their nature. While fiat currencies value is based on the exchange rate of each country’s central bank, with cryptocurrencies there is no fixed median price to use as a reference.
What you can do here, is compare the crypto prices in different exchanges. Fortunately, there are many tools and websites that can do that for you.
Updates are not made at the same time
Another thing to consider, when researching cryptocurrencies and their prices, is that exchanges change their prices at different times. Each platform displays prices, based on the latest traded price on the same exchange. That is why there is a big chance for prices to differ across the board, but most of the time they are similar.
Different pairings
Every digital currency is compared to another particular currency, for example, the US dollar. Of course, there are many factors that affect the cryptocurrency, and can also affect the paired asset.
Conclusion
Cryptocurrencies for sure are an interesting long term, and short-term investment. Their high volatility and price differences is what makes them a good trading asset. There are already many traders, managing to make great profits from different trading and arbitrage strategies.
Happily, there are also many tools and platforms, offering an automated cryptocurrency arbitrage. Cryptoarbi is one of those platforms. Here, all you need to do is choose a subscription plan, and we will do the work for you.
Of course, cryptocurrencies are also a risky investment. The only advice we can give you for sure, is always do good research before investing in digital assets, and never invest more than you are willing to lose!