How about a trading technique that allows you to make money even when prices drop? If you are a crypto investor, you will surely love this idea! Indeed, cryptocurrency prices are known for their high volatility. So, know this is not a prank! This technique exists and is legal! This is crypto arbitrage …
Crypto arbitrage, smart and profitable strategy
Whether you’re new to crypto or not, you’ve probably heard of crypto arbitrage (or crypto arbitrage). This type of trade is very popular now. But what is it all about?
What is Crypto Arbitrage?
To understand crypto arbitrage, it is important: back to the basics of trading… Typically, an investor buys a certain amount of cryptocurrencies on the exchange in order to resell them when the price rises. Thus, capital gains are made due to the difference in price that appears over time.
For crypto arbitrage, the principle remains the same. Capital gains are also realized on difference in price of the same cryptocurrency… On the other hand, this price change does not occur over time, but between different exchanges… What do you mean ? In fact, you should be aware that the price of a cryptocurrency does not update at the same time on all trading platforms. So, at time t, you will find that the price of the same bitcoin (or another altcoin) is slightly different on the two exchanges.
The principle of crypto arbitration is to exploit these differences. That is why we are talking aboutbuy cryptocurrency on the exchange to resell it instantly on another platform that offers it for sale at a higher price. The arbitrage technique isn’t just for cryptography. It can also be applied to other assets such as stocks. However, since the cryptocurrency market is extremely volatile, arbitrage in this niche is especially profitable.
An example of understanding crypto arbitrage
There is nothing better for understanding crypto arbitrage than taking an example. Imagine that at time t, platform A offers to buy Bitcoin Cash (BCH) for € 850. At the same time, Platform B is offering Bitcoin Cash for sale for € 900.
As an investor, you want to take advantage of this price difference. Let’s say you buy 10 Bitcoin Cash. Thus, the total value of your investment is EUR 8,500. You decide to transfer your 10 BCH to platform B and then resell it. You will then earn € 9,000 from selling your BCH on platform B, for a total profit of € 500. Clever, isn’t it?
Of course, the same principle applies to other cryptocurrencies like Bitcoin, Ethereum, etc.
However, be careful. To be comprehensive when calculating profitability, you must: integrate purchase and resale costs inherent in each platform. In addition, the transition from one platform to another does not happen overnight. In the meantime, it is possible that the price on platform B has changed, which may have some impact on the overall profitability.
What are the types of crypto arbitrage?
If the principle remains the same, there are different methods of crypto arbitrage. In general, there are three main ones.
Manual Crypto Arbitrage
The first technique matches so-called “manual” arbitration… In what sense? In this technique, you will take care of everything. You determine the difference in price between the exchanges and make the corresponding purchases and sales. If this works, this method nevertheless requires a lot of time and a little experience otherwise you will make mistakes and lose money.
Triangular Crypto Arbitrage
The second method is calledtriangular arbitration “. This method does not involve using multiple exchanges. The idea is rather to stay the same, but to carry out several transformations to create added value. For example, we will talk about buying bitcoins with euros, then converting it to Cardano (ADA) and finally converting these Cardanos to Euros.
Automatic Crypto Arbitrage
The third method correspondsautomated arbitration… The principle is the same as manual arbitration, except thatthe software is responsible for making transactions… This technique is currently considered the simplest and most effective. On the other hand, finding a serious and transparent service is entirely up to you.
3 main benefits of crypto arbitrage
Make quick wins
The first advantage of crypto arbitrage is that this strategy makes you money very quickly. Indeed, the whole point of crypto arbitrage is to take advantage of temporary price differences. Thus, the unit of time is much lower than in traditional trade. With Crypto Arbitrage, You Start Collecting Profits from the first day of trading…
Profit from cryptocurrency volatility
The volatility of cryptocurrencies is viewed by traditional investors as the flip side of the coin. If you are betting on crypto arbitrage, you are turning this disadvantage into an advantage. Cryptocurrency volatility causes significant price fluctuations, which creates more arbitration opportunities…
Find opportunities regardless of the market trend
Finally, crypto arbitrage allows you to make money regardless of the state of the crypto market. In traditional trading, you buy an asset with the expectation that it will rise in value and that you can profit from the resale. But if the price falls, you have to wait or sell at a loss. Conversely, there are always opportunities for crypto arbitrage, whether the market rises or falls…
Crypto arbitrage is an investment strategy that plays with market volatility! Well mastered, it allows you to make significant profits in no time! Do you like it?
This text is not investment advice. Do your own research and only invest money that you can afford to lose.
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