How to Do Crypto Arbitrage and Earn Bitcoin
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With the traditional centralized banking system in crisis, many people are looking for alternative, low-risk means of storing their money and making a passive profit on their savings.
An increasingly popular option these days is crypto arbitrage. In this article, we will examine how it generates profits, look at the different types of arbitrage, as well as the pros and cons that need to be weighed before diving in and committing your capital.
What does a Crypto Arbitrage Bot do?
Crypto arbitrage involves exploiting short price deviations. Exploiting volatile price differences between exchanges requires a speed and processing power that is almost impossible to achieve manually. So it is usually performed using algorithmic trading software.
The bot will also track all the coins available on multiple exchanges, 24/7 to find price differences. When it finds a disparity, it will make money by buying the coin on the exchange where it is valued the lowest and then immediately sell it where it is valued the highest.
While a bot can work at incredible speed and automatically execute a high volume of trades every second, it is only as good as its programming. It is advisable to be careful and do your homework, check the profit percentages, reliability, trading fees and reputation of the chosen bot.
What are the different types of crypto arbitrage?
While crypto arbitrage always involves exploiting price deviations, there are a few different strategies that can also be implemented.
In its simplest form, crypto arbitrage involves buying a coin cheaply on one exchange and then selling it on another exchange at a higher price. This can also be performed across both centralized and decentralized exchanges and is referred to as cross-exchange arbitrage.
If you take advantage of price divergence on a single trading platform, when it is a 3-part trade, it is known as triangular arbitrage. The first step is to trade one crypto for another that is undervalued on the platform. The next step is to sell the undervalued coin for one that is overvalued. You will then sell the overvalued coin to the first crypto traded on the chain.
Then of course there is location-based arbitrage. This involves taking advantage of price differentials based on geographic location, such as the famous Kimchi premium, where South Korea offers premium Bitcoin prices compared to exchanges in other regions. The important factor here is to remember that the transaction fees and conversion rates may add up to more than the reduced purchase price and must be checked beforehand.
What are the disadvantages and advantages of arbitration?
Arbitrage is often considered a relatively safe, low-exposure trading strategy, especially compared to other ways of investing in the volatile crypto market, but that doesn’t mean it’s without risk.
Slippage is the difference between the expected price of a trade and the price at which it is executed. It occurs most often on small exchanges with low cap coins and minimal liquidity. If you do not close the trade quickly enough, there is a risk that the selling price will deviate from the quoted price to such an extent that it will result in a loss.
Arbitrage trading can involve a wide range of costs, one of which is the exchange rate you pay when transferring local FIAT currency to your chosen cryptocurrency. Additionally, each exchange charges its own fees to transfer currency and to execute trades, so you need to check exactly how much your chosen platform charges, as this can eat into your profits significantly.
On the plus side, with crypto arbitrage, profits are consistent in all market conditions.
Arbitrage offers a hedge against tanking prices since price differences will continue to appear as often in a bear market as in a bull market, and profits will remain stable even during an economic downturn. A sudden market collapse cannot wipe out your capital, and you don’t have to wait for the market to recover to see a profit, as you can profit from an arbitrage investment right from day one, regardless of market conditions.
Since arbitrage is rarely done manually, due to the speed and efficiency required to exploit short price differences across multiple platforms, it is very easy. Most arbitrage software lets you just deposit money and get on with other things, while the algorithm takes over. This means you don’t need to use technical indicators to identify price patterns, monitor market news and execute trades at the exact right time.
What do all the best arbitrage platforms have in common?
The best arbitrage platforms have all the right authorizations and licenses, offer generous passive profits and a wide range of financial options.
By far the best-known player in the arbitrage field is ArbiSmart, an EU-authorized and registered automated crypto arbitrage platform established in early 2019. ArbiSmart supports 30 different FIAT and cryptocurrencies, and you can choose from a variety of crypto arbitrage investment plans. The plan contracts are for a wide variety of time frames as short as one month and as long as 5 years. The longer the funds are locked in a plan, the higher the annual percentage return. You simply sign up, deposit money in Bitcoin, Euro or another preferred currency and let the bot take it from there. Profits reach as high as 147% a year, plus compound interest, with the exact amount depending on the amount deposited, your balance currency and your account level.
Whichever platform you choose, arbitrage offers a low-risk, bear-proof investment opportunity that can double your Bitcoin within just 18 months. This makes it an attractive alternative to high risk options such as swing trading and low risk but low return options such as HODLing.
To start making a reliable profit on both FIAT and crypto, open an arbitrage account now!
*This article was paid for. Cryptonomist did not write the article or test the platform
