BITCOIN ARBITRAGE OPPORTUNITY AND CHALLENGES
BREIF INTRO:
Arbitrage is a trading technique in which cryptocurrency are bought and sold on many different exchange and at different price (Investopedia).
Arbitrage simply means exploitation of price different similar or identical or similar financial instrument on different market.
HOW BITCOIN ARBITRAGE REALLY WORKS:
Am sorry, for the experts, i love explaining stuff is simplest term possible as lots of newbies flow into the cryptocurrency world daily. Bitcoin Arbitrage is simply buying bitcoin on an exchange where the price is low and selling it on another exchanger where the price is relatively high. price of bitcoin differs with few dollars from one exchange to another , lets use a common illustration below for a more simplified explanation.
Lets say PETER bought $10 worth of bitcoin on coinbase at $2,420 and sells of on BTC-E at a price of $2,450, thereby making a woeful $3 per $1 worth of bitcoin sold..
Total profit from such would be estimated to
BUYING @ $2,420 * $10 = $24,200
SELLING @ $2,450 * $10 = $24,500
making a profit of $300, that why arbitrage is called exploitation of price..
Don't get too exited, its not that easy as there are some challenges
Transaction fees: you will agree with me that bitcoin transaction fees are quite enmerous, and thus reducing your profit margin..
Delay in transaction confirmation: Opps, you can all relate..
Fear, Yeah while you are still contemplating whether to buy the damn coin or not, the price is increasing .. lol
How to overcome the challenges
For those still using bockchain.info wallet for trading, i would have said you are in the 90's, but i wont even though i just did.. well blockchain.info is a good and secure wallet for storing bitcoin, but i wont advise a trader to use that for trading. To tackle issues of high transaction fees and delay in confirmation , i would suggest you get a coinomi wallet another other good wallet out there.
My view about bitcoin arbitrage is that you can never loose..
WHY??
In case you arbitrage 10$ worth of bitcoin and $2,450 but the price on other exchange had come up and there are just slight difference between the price, you can easily turn it to HODL
Yea, my favorite word, buy and hold till the price increase, then you make your profit.. its doesn't really matter how you mixed it up, either arbitrage, hodl, trade, what matters is how much profit you made on you bitcoin..
Be rest assured that bitcoin arbitrage hold a huge earning potential within , but it not meant for the faint hearten.. free free to share your thoughts and also share your arbitrage experience.
Welcome @bitdude . I hope you enjoy here as much as I do! Nice post, I will follow your account, please follow me at @rohitrajput and give a upvote to this comment.
Yes for sure am having a good time here. Will check out your profile posts.
To arbitrage properly, in your example, one would need to hold a 10 BTC position on BTC-e and a $24,200 position on Coinbase/GDAX. When the spread between exchanges becomes favorable, execute a buy on GDAX and a sell on BTC-e simultaneously. Then one would have to wait however many days it will take to receive a wire from BTC-e's bank, and deposit the funds (minus profit) back to GDAX. The other thing you didn't mention, that would also have to be factored in, is withdrawal fees and SWIFT fees that may be collected by any of the banks involved (including intermediaries that the USD withdrawal wire gets routed through).
Fantastic really! What a great & superb contribution.
EtherDelta is a Goldmine, insane arbitrage opportunity https://steemit.com/gifto/@fifelue/tips-be-a-millionaire-using-arbitrage
Really impressive article...
Thanks really, will try and include the corrections as noted by the commenter above.
Thank you for the article...I'm such a newbie, but slowly beginning to understand how all of this works! Keep posting, I'm following you now.
Thanks Diene
I wrote an article that explains a simple way to arbitrage across cryptocurrency exchanges, it also explains it in very simple terms https://steemit.com/arbitrage/@kesor/the-math-behind-cross-exchange-arbitrage-trading