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Cryptocurrencies are not just a fad but a financial tool with tremendous potential. One method to capitalize on this market is cryptocurrency arbitrage. But what is it, and how can you use it to make money?
Due to the volatility of the currency and the increasing number of cryptocurrency exchanges available to users, this system has become very popular in the crypto world. It allows users to execute this process and realize profits almost immediately.
Do you know what cryptocurrency arbitrage is?
Arbitrage, in simple terms, involves buying an asset in one market and selling it in another at a higher price. Regarding cryptocurrencies, this means buying a digital currency on one platform and selling it on another, taking advantage of price differences between exchanges.
Real example: Imagine that Bitcoin is valued at $10,000 on exchange A and $10,200 on exchange B. You could buy Bitcoin on A and sell it instantly on B, making a profit of $200.
Cryptocurrency arbitrage typically involves quick trades. Given price volatility, market opportunities can be missed if you let even a few minutes pass or don't secure a good return.
As we've already mentioned, this process is possible because crypto exchanges do not always offer the same prices for a specific token. This price difference, often just a few dollars, is exploited to generate profit.
Why does the value of cryptocurrencies vary between exchanges? Cryptocurrencies derive their value from the law of supply and demand. Hence, exchanges with better liquidity tend to offer better prices, while those with less liquidity often have higher prices.
<aside> 💡 However, it's not just liquidity that directly influences cryptocurrency prices. The geographical location of an exchange and its time zone can also impact the price of a specific token. As a result, those interested in cryptocurrency arbitrage often register on multiple platforms worldwide.
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There are various forms of arbitrage in the crypto world. It's essential to understand this, as throughout the day, different strategies can be applied to maximize profits.
Here are the four most prominent or well-known types within the crypto community.
The most popular. Imagine you're exploring the best prices on a particular cryptocurrency. On TruBit, you find the cryptocurrency priced at $5,000, but on another exchange, it's listed for $6,000.
This disparity presents a classic opportunity for arbitrage. By purchasing the cryptocurrency from TruBit and then selling it on the other exchange, you stand to make a profit.
Perhaps you aren't a user of another exchange, but we can still engage in time arbitrage. Values can fluctuate even within the same exchange, allowing us to pursue various strategies for greater profit.
For instance, on the TruBit P2P Platform, you might find your favorite cryptocurrency priced at 5,000 USD. However, upon checking the TruBit OTC Market within the TruBit Pro Exchange, you discover you can sell it for 6,000 USD. This allows you to leverage different segments of an exchange to maximize profits.
What if we do arbitrage with 3 different cryptocurrencies? This is called triangular arbitrage. It is about taking advantage of price differences between 3 cryptos, using 2 or more exchanges. We explain it in a better way:
Keep in mind that this strategy is already more advanced, since you have to study prices and markets to avoid that the losses are greater than the expected profits. Consult a cryptocurrency academy to know the prices and behavior of cryptocurrencies.
This form of crypto arbitrage is perhaps the most complex and is suited for true professionals. It employs various techniques and statistical analyses to identify buying and selling opportunities across different markets. To successfully employ this strategy, one must have a deep understanding of two or more exchanges. Through analysis, we can attempt to predict cryptocurrency prices. This involves considering factors like seasonality, the overall market situation, and in-depth analysis of each exchange.
Cryptocurrency arbitrage allows you to increase your overall profitability
Arbitrage is more convenient:
To have a proper cryptocurrency arbitrage strategy, we need to have accounts in cryptocurrency exchanges. But, since it is our money, the ideal is to have 2 or 3 secure and regulated options that we know will work properly.
A great option to consider is TruBit, especially if you are in Latin America. The platform has a large portfolio of cryptocurrencies available for cryptocurrency arbitrage processes. In addition, you can buy crypto and fund your account with regulated payment methods.
TruBit can be one of your tools to do arbitrage, as there are some outstanding features like these 3:
In TruBit you can also find different tools to do different types of crypto arbitrage, such as:
<aside> ✅ Now it only remains to choose 1 or 2 more exchanges. There are also very well-known worldwide options such as Binance, OKX or Coinbase, which can work with TruBit to make you earn as fast as possible.
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There is no fixed answer. As in the investment market and the cryptocurrency market in general, there are several factors that can determine the amount of money you can earn, such as the following:
It is essential to research and be informed in order to maximize your profits. Also, as we always recommend, never invest or gamble money that you are not willing to lose, as volatility can work against you on many occasions.
Cryptocurrency arbitrage is a financial technique that, if used correctly, can be lucrative. By buying low and selling high between different exchanges, you can take advantage of price differences to generate profits. However, it's crucial to stay informed, understand the risks, and utilize the appropriate tools.
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