The Concept of Crypto Arbitrage Trading and Various Methods


“The presence of multiple crypto exchanges provides an opportunity for the traders to arbitrage trade in the crypto markets. Arbitrage trading is not an easy feat to achieve otherwise everyone would have done it, but 3 simple methods can help even the retail investors to perform arbitrage trading that we are going to throw some light upon.”

The Crypto Arbitrage Trading: The Concept

Arbitrage trading is the term given to trade and profit from the price differences for an asset on different exchanges at a given time. As the crypto industry is unregulated and there are multiple crypto exchanges and thousands of cryptocurrencies to choose from, this results in different prices of a crypto asset at a given time on multiple exchanges. This difference in price can result in a profitable opportunity if an asset at one exchange is bought at a lower price but sold on another exchange for a higher price in a short period of time. The high volatility of the crypto industry aids in performing the crypto arbitrage.

3 Simple Methods of Crypto Arbitrage

The Common Method

The most common method to perform crypto arbitrage trading is choosing two or more crypto exchanges and tracking the price of a coin at each. Once the arbitrage opportunity is seen, the coin is bought at the exchange with the lowest price and then sent to the exchange with the highest price and sold at that exchange making a profit. The problem with this method though is that there might be network congestion and the withdrawal from one exchange to the other takes time that results in losing the arbitrage opportunity.

The Sophisticated Method

This is a more sophisticated method and requires a larger capital at hand with the trader. Through this method a trader can buy and hold some or equal quantities of cryptocurrencies for arbitrage at two different exchanges and when the arbitrage opportunity arises, the trader must buy at one exchange with lower price and sell at the other with the higher price at the same time. For this method to work more efficiently the trader can have accounts and funds on multiple exchanges, the more the better. The only downside is that huge amounts of funds are required.

The Bot Method

This is another and the most profitable method for arbitrage trading as the Bots can monitor the markets 24×7 and find and seize many more arbitrage opportunities than a trader himself. Creating such bots is an easy task for a programmer but for the traders who are not acquainted with the programming can have already developed bots for free and also for subscription costs.

Disclaimer: The article should not be considered as any financial advice. It is advisable to conduct thorough research before investing.

Photo by – WorldSpectrum on Pixabay