Arbitrage Trading in Crypto Markets (part 09)
Arbitrage trading in cryptocurrency markets offers numerous practical applications and real-world examples that highlight its profitability and challenges. It is very difficult to understand any subject without real examples. I have discussed Arbitrage Trading in the Crypto Market in the last 8 posts. I have tried to present everything consistently through discussion so that newbies can get a real idea about this trading from here. In today's post, I will share some real-life examples so that you can capture this matter more easily.
Spatial Arbitrage
Spatial arbitrage is one of the most common and straightforward forms of arbitrage trading. Let’s consider a real-world example involving Bitcoin (BTC) across two major exchanges, Binance and Coinbase.
A trader notices that Bitcoin is priced at $60,000 on Binance and $60,700 on Coinbase. The trader buys 1 BTC on Binance and simultaneously sells 1 BTC on Coinbase. The gross profit from this trade is $700. However, after accounting for trading fees (e.g., 0.1% on Binance and 0.5% on Coinbase) and transfer fees, the net profit might be slightly lower but still substantial.
There are some Challenges in this real-life example like Transferring BTC from Binance to Coinbase can take time, during which the price discrepancy might close. And high withdrawal and network fees can reduce the overall profit. Several tools like Arbitrage Bots, Price Trackers and APIs can be used here. Tools will help in the reduction of the time factors of losing fund during trading. Technology is now advanced and logical code has the solution to those challenges. Many Blockchain is shifted from PoW to DPoS so that fee is minimum in the network.
That's it for today and I'll wrap up the discussion with some more real-life examples in the next post.
~ Regards,
VEIGO (Community Mod)
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