Cryptocurrency Arbitrage
Hello, friends!
As you can see, crypto arbitrage has aroused your great interest, so it will gradually introduce you in this direction. Let's start with the basic things.
What is Cryptocurrency Arbitrage?
To make money in the market, you need to buy assets at a low exchange rate and sell them when they rise in price. The difference between the cost of buying and selling becomes the net profit of the trader. Arbitrage trading works on a similar principle.
The exchange rate of one cryptocurrency at a time may differ on different platforms.
For example, bitcoin can cost $50,000 on Binance, and $50,500 on another exchange. It is this difference that arbitrage traders use to make money.
The inter-exchange transaction is carried out in two stages:
- Buying cryptocurrencies on an exchange where the price is lower;
- The sale of the same asset on another exchange, where the price is higher.
There is also intra-exchange arbitrage, when orders are opened on the same platform. In this case, the trader earns on the difference between the rates of one asset in different trading pairs.
The rate of a single cryptocurrency depends on various factors. For example, the intra-exchange price of BTC in pairs to USDT and to USD may differ. The cost is also affected by trading commissions and withdrawal conditions.
In addition, the relevance of the exchange is important:
- Large trading platforms have a high level of liquidity, so their quotes are as close as possible to the average market;
- For small exchanges, the liquidity for new coins may be too low, and quotes may differ markedly from the average market.
Unlike conventional trading, in arbitration, buying and selling must be carried out as soon as possible, without waiting for the market situation to change. Special bots can be used to speed up this process.
Заработок на арбитраже
For arbitrage, a trader needs to create and set up accounts on all platforms where he plans to earn money. In the process of trading, you need to look for coins whose exchange rate differs on different exchanges or in different pairs. Fortunately, there are already scanners and certain techniques for searching for a high spread for this case.
An inter-exchange transaction can be carried out using one of two algorithms:
- Open a long order on one exchange and immediately open a short order on another exchange;
- Buy a cryptocurrency on one exchange and transfer it to another exchange to sell it for more.
In the second option, the exchange rate may have time to change in an unfavorable direction during an inter-exchange transaction. In this case, the price difference may disappear and the trader will not earn anything. Therefore, for arbitration, it is better to choose cryptocurrencies that are created on blockchains with high bandwidth.
Ask a question: @CryptoSpread_adm
