Cryptocurrency arbitrage: concept, types and ways of earning

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Getting income with cryptocurrency attracts more and more attentionth quantitiesa of people. Some of these ways require a high level of knowledge, understanding of the principle of operation and the ability to use the appropriate tools. To this category applies arbitration, through which you can get practically unlimited profit. What types of arbitration exist and what tools are used to work with them? Read about it in our article.

The concept of cryptocurrency arbitrage

Cryptocurrency arbitrage is understood as carrying out operations that are aimed at making a profit from the difference in the value of assets within the trading platform or on different sites. Trading one asset on two exchanges is especially popular. The situation with different prices arises due to different demand for the same asset on different trading floors. Other factors also have an additional influence. Therefore, on one platform, bitcoin can be $100 or $300 cheaper, and due to this price spread, the user makes a profit.

To keep abreast of changes in the pricing of digital currencies, you should choose the right tool. For example, the CoinMarketCap platform is great for this. If you choose a well-known coin that is traded on different exchanges – the same bitcoin – you can see a run-up in value. In the case where the difference allows you to cover the cost of commission, this is a good opportunity to make a profit on resale.

Arbitration types

There are two types of arbitration:

Static arbitrage is based on market inefficiency. For example, using high or low volatility at the moment compared to the historical one. Or with a multidirectional movement of assets in the event of a correlation of 50% or more. It should be noted that this method is more risky, so it is better to use it for already experienced arbitrageurs.

In classical arbitrage, a chain of instantaneous transactions occurs:

Also, classical arbitration can use a strategy when actions are delayed in time. This may include:

Intra-exchange and inter-exchange arbitrage

Arbitrage trading occurs in two ways:

Programs for cryptocurrency arbitrage (scanners and bots)

For more efficient arbitrage, there are special programs that can significantly automate the tracking of profitable pairs for arbitrage. Next, we will consider a list of programs for automated cryptocurrency arbitrage. The list is based on consumer inquiries and does not constitute a recommendation.

  1. Bitcoin Dealer. It is a special bot that works within one specific exchange – Bitstamp.
  2. blackbird. This bot performs bitcoin inter-exchange arbitrage. Its essence is in comparing the performance of digital assets on different platforms. Based on this, he selects the best options for transactions. With it, you can organize earnings on short positions.
  3. Bitsgap. The program is also a bot that can monitor pairs suitable for arbitration on various sites. Customers are given a free trial period of seven days.
  4. triangular arbitrage. With the help of this program, it is possible to earn money by converting cryptocurrencies with an increase in profit.
  5. This is a special inter-exchange arbitrage scanner that analyzes and shows profits.
  6. This bot has a very simple interface, which is great for beginners. The software supports three arbitrage strategies and 90 trading pairs.
  7. Cryptohopper. Dutch bot, which is distinguished by its user-friendly interface and interaction with various exchanges. It is designed not only for inter-exchange trading, but also for arbitrage between multiple trading pairs on the same platform.
  8. bitscreener. A convenient scanner that can be used both in the browser and as a mobile application on iOS and Android. Shows the following characteristics of digital assets: type of coin, which exchange it is traded on, market capitalization, value, etc. It can be used in the free version. The paid version adds a few extra options.
  9. marketcap. This is a free scanner that searches for crypto by selections such as DeFi, Polkadot tokens, stablecoins, etc. You can also search for coins by value, capitalization, 24-hour trading volume, etc.

Rules for choosing programs for arbitration

When choosing a bot or scanner for safe profit, you need to consider the following criteria:

Advantages and disadvantages of arbitration

A user who decides to engage in arbitration should know all the nuances of this type of earnings on cryptocurrency. From positive moments you can note:

Arbitration also has its own limitations, which should be taken into account with insufficient knowledge of fundamental and technical analysis. These include:

In general, if you choose a reliable tool for trading, carefully monitor the market and reasonably make risky operations, then it is quite likely to make a profit in a short time. Moreover, this way of earning is available to anyone who has enough funds to enter the market and basic knowledge of exchange trading.

Disclaimer. Investing in any financial asset carries the risk of losing capital. Nothing in this text can be considered an investment recommendation or an offer to buy/sell any financial instruments. For all their actions in the stock market, each investor bears full responsibility independently.


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