Cryptocurrency Arbitrage: A New Lucrative Strategy

The volatile nature of cryptocurrencies has continuously captivated consumers and investors. Many people are curious to learn about the many opportunities that cryptocurrencies can bring. However, it is also admitted that the crypto industry is less efficient when it comes to its trading functionality. Hence, there is a lot of opportunities to exploit it with the use of an arbitrage scheme. Now the question is, how can you take advantage of this opportunity?

CRYPTOCURRENCY ARBITRAGE

Generally, arbitrage is the process of taking advantage of inefficiencies in the market. This is common in markets wherein prices usually fluctuate – especially in the crypto trading industry. Cryptocurrency exchanges are largely unregulated. Thus, prices and rates differ from one crypto exchange from another, and this is why opportunities for arbitrage exist.

Traders can acquire huge profits using the crypto arbitrage scheme – they buy a coin at a certain exchange that offers very low prices, and then sell the same on another exchange that has priced the same coin at a higher rate. And all that can be done on the same day!

To acquire huge profits, a lot of the work is in finding, listing, and comparing crypto prices from one exchange to another. It is important to find the lowest price for a certain coin, and then find an exchange where such coin is priced at a high rate. Before trading, you should also calculate the difference to know how much profit you are going to make from the price differences.

HOW TO EXECUTE TRADES WITH AN ARBITRAGE OPPORTUNITY

Taking advantage of an arbitrage opportunity can be done in two ways. It could be through Simple Arbitrage or Triangular Arbitrage. Simple Arbitrage is just like the process that was explained above. This is the mere buying and selling of cryptos across different exchange platforms and earns profits through the price difference.

The Triangular Arbitrage method is more complicated. This involves 3 different types of cryptocurrencies, but the process can be done in just one exchange. For those who really want to maximize higher profits, the process can also be done across multiple crypto exchange platforms that offer different rates for each crypto.

To use Triangular Arbitrage, you start with one crypto and exchange it for another. For example, you can start with Bitcoin, then trade it with Litecoin. After Litecoin, you have to trade with another crypto. You can choose to trade your Litecoin with Ethereum, for example. After choosing your third crypto, you have to go back to your first and original crypto which is Bitcoin (in this example). And this is how you complete the “triangle”.

The profit you get will be the price difference of your starting value and the end value (after completing the triangle). To maximize profits, you can compare the prices of each coin in multiple exchanges, but the process can definitely take longer.

Cryptocurrency arbitrage is just one way to acquire profits through cryptocurrencies. Trading, mining, and investing in cryptocurrencies are also lucrative strategies when it comes to the crypto industry. However, if you want a new way to get profits through crypto investments, you can try cryptocurrency arbitrage!