The crypto market has become incredibly volatile in the last few months, which means opportunities to profit are everywhere!
But before you take the plunge and start trading, you need to know all of the ins and outs of making money with crypto arbitrage.
In this guide, we will cover how crypto arbitrage works, how to get started with crypto arbitrage, what resources you need, and much more!
By the end of this guide, you’ll have everything you need to start your own crypto arbitrage business! Let’s get started!
What is Crypto Arbitrage?
Crypto arbitrage is taking advantage of price differences between cryptocurrencies on different exchanges.
It involves buying cryptocurrency from one place and selling it at another for profit.
There are quite a few people that try to do crypto arbitrage.
The problem is, that most of them are not making any profits while they think they are making some big money in crypto arbitrage trading.
Many of these amateur crypto traders will buy 1 coin at one exchange, transfer it to another exchange with a lower price, and sell it there.
While technically you can make some money doing that, you’re actually losing more than you gain because of all fees involved with transferring coins back and forth.
So if you’re going to start a crypto arbitrage business, I recommend reading the full guide below before starting your own business. Otherwise, you might waste your time and lose money instead of earning something.
If you want to start a crypto arbitrage business, keep reading! How to start a crypto arbitrage business: Ok so now let’s get into details.
First, let me tell you what equipment you need to have when you decide to run your own crypto arbitrage business.
Requirements For Crypto Arbitrage
Arbitrage is a trading strategy used when there are differences in prices of similar assets among different markets.
Taking advantage of such price differences is known as arbitrage.
Basically, an arbitrage involves purchasing an asset in one market and selling it immediately at a higher price in another.
To start cryptocurrency arbitrage in Nigeria, you will need the following.
- Cryptocurrency– Digital asset designed to work as a medium of exchange. Bitcoin, Litecoin, and Monero are all forms of cryptocurrency. Altcoin – Any cryptocurrency that is not bitcoin.
- Arbitrage – Taking advantage of price differences between two or more markets for an immediate profit. Example: You can buy bitcoin on one exchange and sell it on another for profit.
- Mining – The process of adding transaction records to Bitcoin’s public ledger (the blockchain). Miners get rewarded with new bitcoins for processing transactions in each block they add to the blockchain. Ethereum mining – Ethereum is an open-source project based on blockchain technology that enables developers to build decentralized applications. Ether is a cryptocurrency whose blockchain is generated by Ethereum, which can be transferred between accounts and used to compensate participant nodes for computations performed.
- ICO (Initial Coin Offering) – A method of crowdfunding via the use of cryptocurrency, which can be a source of capital for startup companies. Inflation – When prices rise over time due to increases in money supply, the currency loses its value over time.
- Fiat Currency – Currency issued by the government authority, backed only by physical assets such as gold or silver and not by commodities such as gold or silver. The value of fiat currencies is derived from the faith and trust that people have in the governments who issue them.
Where Can You Do Crypto Arbitrage?
Arbitrage is a fairly broad concept. It usually means buying something cheap and selling it where it’s expensive.
But how do you know where something is cheap?
These exchanges allow you to buy crypto with USD (or other currencies). You can then transfer that crypto to another exchange that supports different cryptos (e.g., BTC on GDAX -> ETH on Poloniex) and trade for whatever altcoin is cheap.
This strategy works best if you have a good understanding of what makes one coin valuable over another, but even if you don’t, many resources online will guide you through these steps.
Why Crypto Arbitrage Might Be Lucrative
If you’re starting from scratch and have no business skills to offer, crypto arbitrage might be one of your best options for an easy income stream.
You won’t need much more than an Internet connection and a lot of patience. Opportunities can arise anywhere in any market—you just need to know where to look for them. In today’s fragmented cryptocurrency markets, it could be argued that profit opportunities are everywhere.
As long as money is made, there will always be people looking for ways to make money. It doesn’t matter if it’s short-term or long-term; what matters is finding a way to make money while doing something you enjoy or at least find interesting.
Let’s take a closer look at what exactly crypto arbitrage is and how you can get started with it right away!
In essence, arbitrage is all about finding differences in price between different exchanges and buying on lower-priced exchanges to sell on higher-priced ones.
These opportunities do not last forever because eventually, someone will notice that prices are mismatched on different platforms and act accordingly (if they haven’t already).
This means there isn’t any guarantee you’ll make a profit – but only if you fail to act quickly enough when such situations occur. Here are some of the things you need to know before getting started with crypto arbitrage:
What You Need To Get Started With Crypto Arbitrage
Before you can start profiting from price discrepancies between cryptocurrency exchanges, you need to have at least one account set up on each exchange.
It doesn’t matter what type of account it is—you can even use your personal trading accounts for crypto arbitrage if that’s what works best for your situation.
Some exchanges require verification, and some won’t; again, choose whatever works best for you.
Once you have an account on all or most of the major cryptocurrency exchanges (Binance, Bittrex, Coinbase Pro, Bitfinex etc.), it’s time to look into how exactly you can make money with crypto arbitrage!
The easiest way to make money with crypto arbitrage is through bot trading. The idea behind bot trading is simple – create a program that acts as your trading assistant and let it do all of the work for you. This means setting up rules for your bot so that orders are placed automatically when certain conditions are met.
Step-By-Step Crypto Arbitrage Process
Find an arbitrage opportunity: With ICOs, it’s relatively easy to identify arbitrage opportunities; you’re essentially buying tokens and selling them back at a higher price (even if it’s only on another exchange).
However, finding good arbitrage opportunities is trickier as far as other cryptocurrencies go. Arbitrageurs are constantly scanning exchanges for price differences between exchanges or vendors that will allow them to profit from buying something low and selling it high elsewhere.
Determine how much money you can make on your purchase of bitcoin, ether etc: Let’s say you have $1,000 USD and want to invest in cryptocurrency. You find out that Bitcoin is trading at USD 5,000 on one exchange but USD 4,500 on another—meaning you could buy Bitcoin cheaper on one exchange and sell it more expensively elsewhere.
Buy BTC/ETH/etc., transfer it to your wallet, then sell it on an exchange with higher prices.
This step may require you to sign up for multiple accounts on different exchanges and deposit fiat currency into each account using a credit card or bank transfer—but depending on which coin(s) you’re trying to trade, there may be some inherent risks involved with purchasing digital currency through certain platforms, especially when working with large amounts of capital.
How To Calculate Costs And Profits Of Crypto Arbitrage
You need to know the formula: Cost to purchase / Current value = Profit.
Let’s take an example where BTC sells for $7,000 on Coinbase and $7,200 on Binance. If you want to profit from that discrepancy, you would buy BTC for $7,000 on Coinbase and then immediately sell it for $7,200 on Binance.
This would net you approximately $200 in profit. You can repeat these steps as often as possible until your desired amount of crypto has been purchased.
Remember that each exchange charges fees, so make sure to factor those into your calculations. Fees will vary depending on which exchange you use.
How To Select Exchanges For Crypto Arbitrage
There are quite a few cryptocurrencies and exchanges on which you can potentially do crypto arbitrage, so it’s best to narrow down your list of exchanges to those with abundant trading opportunities and are in your desired market.
You can check out what exchanges people in your area use or search for popular coins or platforms on CoinMarketCap.
Com and then select from there. For example, if you wanted to focus on crypto arbitrage with Bitcoin (BTC), you would look at exchanges like Binance, Bitfinex, GDAX (Coinbase Pro), Kraken and Poloniex—just make sure they offer BTC/USD pairs!
Also, note that many exchanges won’t allow you to directly deposit fiat currency into their exchange but will only accept cryptocurrency deposits.
You may need to purchase BTC or ETH before exchanging them for other coins.
Once your chosen platform is set up, all that’s left is executing trades! And remember: don’t be greedy; just because an opportunity exists doesn’t mean you should jump right in.
The demand for Bitcoin and Cryptocurrency trading is increasing every day. It’s up to us entrepreneurs to seize opportunities like arbitrage, which means buying low from one exchange (or seller) and selling high on another exchange (or buyer). Today we’re going to talk about how easy it is to set up your own crypto arbitrage system so you can reap profits from price discrepancies between exchanges.
Are you ready to start making money effortlessly at the comfort of your home? Crypto Arbitrage has got you covered on this. Take good advantage of the above guide to get started.