Arbitraging isn’t a newly coined terminology, rather it has been around us since mankind started trading. It looks a bit scary when first encounters, but is a very simple process to make consistent profits.
As for now, there are more than 1000 cryptocurrency exchanges operating worldwide. The number of buyers and sellers gives rise to arbitrage trading opportunities. The more the trade volume, the more will be opportunities to find discrepancies.
What is Crypto Arbitrage?
It is the process of buying cryptocurrencies at a lower price from one exchange and selling at a higher price on some other exchange. The price difference b/w exchanges give birth to arbitrage trading. The main idea is to take advantage of price gaps that exist on a different platform.
How to find the best crypto arbitrage opportunity?
The arbitrage opportunity is determined by simultaneously identifying the positive price difference in similar or identical cryptocurrencies across many online exchanges. In order to find the best arbitrage opportunities, you have to keep an eye on price discrepancies on different exchanges. Anytime there is a price difference, it generates an arbitrage opportunity. How much quickly you buy and sell cryptocurrencies before the volatile market comes into equilibrium exactly calculates your profit.
To make more crypto arbitrage trading opportunities and profits, one should not be limited to just two or three exchanges, rather diversify too many platforms and currencies at the same time.
You can either do it manually or with crypto arbitrage software. In the case of manual trading, you have to sit in front of a computer to monitor price listings on all the exchanges simultaneously to spot an opportunity as crypto exchange websites operate 24/7/365. It can be cumbersome yet lucrative.
Cryptocurrency Arbitrage Software
Manual arbitraging isn’t recommended because of narrow scalability. In order to make better use of price gaps, there are dozens of cryptocurrency arbitrage tools available in the market. They are also known as crypto arbitrage bots. These bots automate the process of trade, execute arbitrage strategies, spot price overlaps, and keep monitoring exchanges 24/7. There are also charts and statistical data to keep track of the cryptocurrency world. The best thing about bots is that you can even link the messaging app with them to get timely notifications.
How to arbitrage Bitcoin?
Today, the bitcoin price is skyrocketing with a huge trade volume worldwide. It is quite easy and profitable to locate an arbitrage opportunity for Bitcoin. People buy Bitcoin at a lower price and sell at a higher price to make profits.
How quickly you do these two transactions make up your arbitrage opportunity.
Buy 1 BTC at exchange A
Sell 1 BTC at exchange B
However, many cryptocurrency websites take some time to verify transactions and require verification which may diminish your bitcoin arbitrage opportunities. You should also calculate potential trading fees prior to arbitraging.
Bitcoin Arbitrage Calculator
It is an API or free tool that allows you to calculate your arbitrage profitability including transaction fees. You can get a bitcoin arbitrage calculator from different exchanges to calculate your net cost including
Cryptocurrency arbitrage strategies
There are many variables you need to take into account: price difference, exchange fee, transfer fee, etc. Usually, arbitrage is most suitable to be made using bots be it simple or triangular arbitrage strategy.
You can either buy or sell the same cryptocurrency on a different platform or different cryptocurrencies on a single platform. But the bottom line to pull opportunities is to spot the best cryptocurrency website which provides crypto arbitrage services with trading opportunities in one go, then identify opportunities, enumerate them, execute the strategy and repeat for consistent profit.