Cryptocurrency Investments Part VI. Cryptocurrency arbitrage.

The essence of cryptocurrency arbitrage is that you buy coins at a low price on one exchange and sell them a little more expensive on another exchange, that is, trade in spreads.
As you already understood, it is necessary to find a stock exchange offering the lowest price of cryptocurrency, and a stock exchange with a high price for a similar coin. The CoinMarketCap site will help you with this. Select the cryptocurrency you are interested in and open the Markets tab. Here are all the exchanges that trade this coin. As you can see, the prices for the same cryptocurrency are different. You must select the exchange with the lowest and highest price. But you need to choose only among exchanges with a high share of the market - from the TOP 50. The difference between prices should be at least 1%, only in this case you can apply the arbitration strategy of multicurrency currencies.

Disadvantages of cryptocurrency arbitrage:

1. Exchange between exchanges is very slow, sometimes it takes more than an hour, and during this time prices can already change against you, and this is not to mention the commissions that exchanges take for trading operations.

2. Arbitration of cryptocurrencies requires impressive capital. Not every trader has more than $ 1000 in his pocket. In addition, if you want to consistently make money on arbitration, you will need even more money.

3. Searching for exchanges for arbitration takes a lot of time. It will take a long time to find exchanges for arbitration, as the rates are constantly changing. For this, it is better to use automatic bots, but keep in mind that now there are a lot of scammers on the Internet trying to sell non-working bots. It’s better to write such a bot yourself or ask a professional programmer about it. The bot will search for profitable courses on various exchanges, as well as buy and sell cryptocurrencies, you only need to make sure that there are always funds in your wallets.

4. You need to consider hidden fees. It must always be remembered that exchanges charge fees for trading, money transfers and exchanges. All fees for input / output must be considered. The most expensive payments are for processing fiat transfers.

5. On a small exchange, there may not be enough volumes for a quick sale or purchase of cryptocurrency. With small capitalization and trading volumes, there are two traps:
   • a sharp adverse change in quotations;
   • inability to sell the asset, as there are no sellers / buyers.

Most importantly, there should be a high turnover on the cryptocurrency exchange. There is no value in a supposedly profitable quote if the application will hang for hours in an exchange glass.

Examples:

1. You buy and sell on one exchange
   Buy 5 ETH for $ 1000
   Exchange for 10000 TRX
   TRX for $ 1020.

2. You buy and sell on different exchanges
   Buy 10ETH for $ 2000
   Transfer ETH to the second exchange
   Sell ​​ETH to the second exchange and get $ 2050

3. The option is suitable for those traders who have several cryptocurrency deposits on different exchanges:
   You have the same number of two different cryptocurrencies on two exchanges:
   On deposit No. 1 we have 500 BCH and 1 BTC.
   Deposit No. 2 has a similar amount.
   On the first exchange we buy 500 BCH, selling 1 BTC
   On the second, we sell 500 BCH, and we get 1.1 BTC.

4. Use of trading bots for arbitration. The script is configured to track prices, place an order, transfer coins to an address on another exchange and sell them there.

5. A deficit of cryptocurrency on one platform and a sufficient amount on another. At the time of growth of a certain currency due to limited offers from users, the rate rose to 5 USD, whereas at larger sites it was 2.5 USD.

6. Pump tokens, you are looking for tokens with sharp price fluctuations. Carefully look at what exchanges are traded and with what volume of trades.

You can see the full range of investments in cryptocurrency here.