Cryptocurrency arbitrage

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Cryptocurrency arbitrage

Arbitration in the cryptocurrency market is making a profit due to the difference in the value of digital coins on different cryptocurrency exchanges.

Types of cryptocurrency arbitrage
Cryptocurrency arbitrage transactions can be conducted on several exchanges and one trading platform. There are two types of cryptocurrency arbitrage:
  • over-the-counter
  • over-the-counter
  • statistical
Interbourse arbitration
Interbourse arbitration consists in buying digital coins at a low price on one exchange and selling these coins on another exchange at a high price.

Over-the-counter arbitration
Using of delayed stock quotes, which the exchange management didn’t manage to bring to an average level.

Statistical arbitration
Making a profit due to the discrepancy in the exchange value of densely correlated cryptocurrencies.

Advantages and disadvantages of cryptocurrency arbitrage

Disadvantages of cryptocurrency arbitrage:

Additional expenses. A significant part of the profit goes to pay commissions.
Relatively large start-up capital. It is necessary to trade in large volumes in order for the profit from arbitration to be tangible.
Low liquidity. A trader will not always be able to buy or sell the required amount of cryptocurrency at affordable prices.
The complexity of arbitration from a technical point of view.

Advantages of cryptocurrency arbitrage:
Quick profit.
Minimal risks in compliance with trade rules.
A large number of exchanges and trading instruments.

The rules arbitration on cryptocurrency market
Automation of process. It takes a lot of time to search for acceptable options for arbitration in manual mode, it takes a lot of time, but it is ineffective. You need to use specialized software in order for an arbitrageur to succeed

Trade in large volumes. Withdrawing money reduces trading volumes and potential profits. You need to make sure that this does not have a big impact on trading volumes before going to the cache.

Entering and exiting at the right time. You need to gain a trading position in a calm market, and get out of it during the hype.

Work on familiar trading floors. you need to find out everything related to OTC transfers, withdrawals and withdrawals on specific trading floors before you beginning.

Using the right trading tools. It is necessary to focus on cryptocurrencies with a high network bandwidth, since transaction delay can adversely affect the outcome of an arbitrage transaction.