If you’re on this page you somewhat at least know what bitcoin arbitrage trading means.
Apparently, the concept of arbitrage trading in the world of cryptocurrencies is more or less the same. Yet, cryptocurrencies are a lot volatile compared to traditional currencies.
Due to its significantly high elasticity compared to fiat currencies cryptocurrency arbitrage trading attracts loads of big players nowadays.
Hence, let’s define what Cryptocurrency arbitrage is with a few words:
Cryptocurrency arbitrage refers to buying digital currency on one or multiple crypto exchange platforms where the price is significantly lower and in parallel selling the coins at a different exchange where the prices are substantially higher, as result profiting from a difference in crypto prices. This is because the prices of cryptocurrencies may vary from one exchange place to the other one. The difference in supply and demand across many exchanges can result in price fluctuation. Sometimes it may take a long time for prices to finally adjust to the global average.
Well, you may have also heard a lot of rumors on how risky they can possibly be on the other hand.
I can admit that arbitrage trading can indeed be risky.
Let’s have a quick breakdown of what our risks are before starting trading on arbitrage:
- Prices of cryptos are highly volatile, which means while buying crypto from one place the price of the other exchange may have changed already. You may end up not only without the desired margin (difference gain if traded successfully from both markets) but also the price could flow so much down that you could end up losing some money after the transaction.
- Hidden fees and charges. Sometimes there are hidden costs that you won’t know until the time you start being part of the game. In fact, fees with different exchanges can vary such as trading fees, withdrawal fees, transfer fees and etc. In this case, your risk is losing some unplanned funds. Consequently, if we deduct also the fees the margin will be less.
Below is one example of a table chart showing all the fees with Coinbase Pro:
Now when we are aware of the possible risks in cryptocurrency Arbitrage Trading let’s have a look at this small crypto arbitrage platform below:
As you may have already noticed the green cells indicate that there is an opportunity waiting for you. Apparently, the percentage is the marginal profit that you can gain if you buy cryptos on one platform and sell in the other exchange platform at the same time. At the moment of writing when we look at the BTC/USD table, we will see that the price for 1 BTC is 7222 USD on Coinbase Pro and at the same time it is 7564 USD on EXMO. Please see the screenshot below:
Basically, this means if you would buy 1 Bitcoin on Coinbase Pro for 7222 USD and sell 1 Bitcoin on EXMO then you would profit 7564 – 7222 = 342 USD. The cool part is that this is just from one transaction.
I see what you’re thinking about now. 15 grants are hell a lot. Well, you don’t have to invest that much money. You could start using this technique with as much money as you can afford. Generally, experts suggest investing up to 20 percent of your investable amount.