Arbitrage crypto trader. Bitcoin in its trade resembles the trading of physical precious metal gold. Why is it said to be similar to buying and selling gold? because when you transact buy bitcoin with a Bitcoin exchanger actually the Bitcoin you have is yours and can be stored wherever you want: safety boxes, laptops, cellphones. Same with gold, after you buy in the store, you can save the gold in any place you like.
As with gold, the benefits of bitcoin trading can be utilized by using arbitration/price differences. For the gold trade, even if the world gold price has a price guide, it is not uncommon to find a very significant price difference from the X gold shop and gold shop in country Y. Either because of tax or because of the different supply-demand in that country.
Gold arbitration traders generally transact in very large amounts to buy gold from a country, put it in a suitcase and sell it in a different country. The difference in a few cents for each gram is a very large profit when trading billions of dollars. But arbitrating gold is not something that is easy to do because of several limitations: the country’s law, the weight of gold, the cost of travel to the destination country and taxes.
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What about the arbitrage of Bitcoin?
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Bitcoin trading is one of the extraordinary trade revolutions. Utilizing the internet network one can buy thousands of dollars of bitcoin up to hundreds of thousands of dollars from a bitcoin exchange in any country just by sitting quietly in front of a computer.
How to Arbitrage
- Choose Two Bitcoin Exchange. Choose two exchangers where you want to take advantage of the price difference. It is recommended to choose one from the international market, one from the local market. Both exchangers must have 2 conditions: trade on Bitcoin and can be withdrawn in fiat money (USD or Ringgit or Euro). Local markets have arbitration because they tend to be slower in adjusting prices.
- Deposit of money. Deposit the same amount of money on both exchanges, you can also put less capital in accordance with your abilities.
- Observe prices. Observe the price of bitcoin on both exchanges, if there is a price difference at the same time. You can buy bitcoin at exchanges at a low price and then sell it at an exchanger that displays a higher price, a small difference in price can provide a big profit
- After buying Bitcoin in an exchange that displays a low price, then the next step you must immediately send the coin that you bought to exchanges 2. If done then you need to sell directly to local currency.
- Furthermore, after selling coins to local currency, immediately withdraw your funds to the Local Bank. Then reload the same large deposit to the 2 Market exchanges, and repeat the Steps of Arbitration trading when you see the momentum of a significant price difference.
Factors that need consideration
- Trading Fee for each exchanger.The lowest trading fee (0.3%) so that it doesn’t matter much but foreign trade fees sometimes apply a slightly higher trading fee so that these factors are taken into account in carrying out arbitration.
- Withdraw Fee for each exchanger. Each exchanger applies a withdrawal fee in his bitcoin trading. This can make your arbitrage profits lost. Try to withdraw as little as possible. Make a withdrawal after the trading number of arbitrage. If necessary, only the profit is withdrawn.
- Market Exchange that will be used for arbitration. This certainly becomes very important in conducting this arbitration technique, because if no difference prices in both exchanges. Hence no opportunity to arbitrage.
- Coin Crypto type (Bitcoin / Altcoin) Which will be used as asset arbitrage. Of course, not all coins have the same market capitalization, so that it will affect changes in the volume of demand and supply that cause the price difference in the exchanger to occur with each other
You must be very careful to take the momentum of arbitration. From the four points above you must be able to do calculations so that the difference in the price of coins in the Market will really get a Net profit. Rich Quick from arbitrage crypto is not impossible, because in 1 day you can do Arbitration several times between Market one with Other Market.
Triangular arbitrage crypto
Triangular Arbitration is an event that can occur in one exchange or also in several exchanges where there is a price difference between three different cryptocurrencies which gives arbitration opportunity.
We know that there are so many exchanges that have a number of markets with a wide choice of quote currencies that sometimes have differences. The difference in quotations is a long list of triangular trading patterns that can be exploited to take advantage of inefficiencies in individual exchange prices.
Triangular arbitrage crypto example
Take a look at the example illustrated image above. In this example, there are 3 different assets on one platform. On this platform, we see the pair LTC/BTC, LTC/ETH, and ETH/BTC.
How to take advantage of arbitration opportunities is as follows:
- Start with one asset. This asset will be the asset that we will eventually return after completing the arbitrage round.
- Start trading with a second currency that connects the original asset and the next asset in the round. The goal is to prevent transversing in the same lane.
- The next step is trading with a third currency that connects the first and second assets. This step is to lock in profits without risk due to the inconsistency of interest rates in all three pairs.
- Convert the third currency back to the original asset.
Triangular arbitrage crypto bot
In finding arbitration opportunities, maybe doing it manually will be quite difficult because the opportunities are not always the same and available. Utilizing a triangular arbitrage crypto bot is one way to arbitrate without having to do it manually.
Of course, this is very helpful to traders in trading. One that is quite well known is the Poloniex Triangular Arbitrage Bot. But to get it you have to pay a set price, which at the time of writing was offered at a price of 0.042 BTC.
Surely this is a pretty high price for some crypto traders. But in general, the use of algorithms in bots will be better than with manuals, and certainly more profitable.
But arbitration is not without risk, only when the risk is more minimal than other methods such as averaging or martingale.
Blackbird arbitrage bot
Blackbird is an open-source arbitration bot for Bitcoin exchange. This is Bitcoin Arbitrage is an automated trading system based on C ++ that carries out buy/sell arbitrations between Bitcoin exchanges.
The way Blackbird works is by looking for arbitration opportunities on the two exchanges, when there is a high difference in the cost of the spreads on the two exchanges, the blackbird will buy and short on both exchanges.
In the illustration above, the way to arbitrate is to Buy Bitstamp and Sell Bitfinnex, and then later will re-sell and repurchase the spread difference that occurs on both exchanges.
From a number of reviews circulating, the use of a blackbird is not without risk, but this is a complicated method for beginners who need to understand how to use it.
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