Crypto Arbitrage
Crypto arbitrage allows traders to exploit inefficiencies in the market. It is a surprisingly simple concept with opportunities cropping up many times a day. Read on to find out the meaning of cryptocurrency arbitrage, its benefits, risks and the useful tools available to help generate profits.
Crypto Brokers
-
1NinjaTrader
Ratings
$00.01 Lots1:50NFA, CFTCForex, Stocks, Options, Commodities, Futures, CryptoNinjaTrader Desktop, Web & Mobile, eSignalACH Transfer, Debit Card, Wire Transfer, ChequeUSD -
2Interactive Brokers
Ratings
$0$1001:50FCA, SEC, FINRA, CFTC, CBI, CIRO, SFC, MAS, MNB, FINMA, AFMStocks, Options, Futures, Forex, Funds, Bonds, ETFs, Mutual Funds, CFDs, CryptocurrenciesTrader Workstation (TWS), IBKR Desktop, GlobalTrader, Mobile, Client Portal, AlgoTrader, OmniTrader, eSignal, TradingCentralCheque, ACH Transfer, Wire Transfer, Automated Customer Account Transfer Service, TransferWise, Debit CardUSD, EUR, GBP, CAD, AUD, INR, JPY, SEK, NOK, DKK, CHF, AED, HUF -
3eToro USAInvest $100 and get $10Securities trading offered by eToro USA Securities, Inc. (“the BD”), member of FINRA and SIPC. Cryptocurrency offered by eToro USA LLC (“the MSB”) (NMLS: 1769299) and is not FDIC or SIPC insured. Investing involves risk. https://www.daytrading.com/ is not an affiliate and may be compensated if you access certain products or services offered by the MSB and/or the BD.
Ratings
$100$10SEC, FINRAStocks, Options, ETFs, CryptoeToro Trading Platform & CopyTraderACH Transfer, Debit Card, PayPal, Wire TransferUSD -
4OANDA USCFDs are not available to residents in the United States.
Ratings
$00.01 Lots1:50NFA, CFTCForex, Crypto with Paxos (Cryptocurrencies are offered through Paxos. Paxos is a separate legal entity from OANDA)OANDA Trade, MT4, TradingView, AutoChartistWire Transfer, Visa, Mastercard, Debit Card, ACH TransferUSD, EUR, GBP, CAD, AUD, JPY, CHF, HKD, SGD -
5UpholdTerms Apply. Cryptoassets are highly volatile. Your capital is at risk.
Ratings
$0$1CryptosDesktop Platform, Mobile AppWire Transfer, ACH Transfer, Bitcoin Payments, Debit Card, Credit Card, Mastercard, Visa, Ethereum PaymentsUSD, EUR, GBP -
6IQCent20% to 200% Deposit Bonus
Ratings
$250$0.011:500IFMRRCBinary Options, CFDs, Forex, Indices, Commodities, CryptoOnline Platform, TradingViewCredit Card, Debit Card, Wire Transfer, Bitcoin Payments, Ethereum Payments, Visa, MastercardUSD, EUR -
7IGForex trading involves risk. Losses can exceed deposits.
Ratings
$00.01 Lots1:30 (Retail), 1:250 (Pro)FCA, ASIC, NFA, CFTC, DFSA, BaFin, MAS, FSCA, FINMA, CONSOB, AFMCFDs, Forex, Stocks, Indices, Commodities, ETFs, Futures, Options, Crypto, Spread BettingWeb, ProRealTime, L2 Dealer, MT4, TradingView, AutoChartist, TradingCentralPayPal, Wire Transfer, Mastercard, Credit Card, Visa, Debit CardUSD, EUR, GBP, CAD, AUD, JPY, ZAR, SEK, DKK, CHF, HKD, SGD -
8Coinexx100% Deposit Welcome Bonus
Ratings
0.001 BTC0.01 Lots1:500Forex, Commodities, Indices, CryptocurrenciesMT4, MT5Bitcoin Payments, Ethereum PaymentsUSD -
9Capitalcore40% Deposit Bonus up to $2,500
Ratings
$100.01 Lots1:2000IFSAForex, Metals, Stocks, Cryptos, Futures IndicesWebTrader, ProEthereum Payments, Mastercard, Visa, Perfect Money, Bitcoin Payments, Debit Card, Credit Card, PayPalUSD -
10Plexytrade120% Cash Welcome Bonus
Ratings
$500.011:2000CFDs, Forex, Indices, Stocks, Commodities, CryptoMT4, MT5Bitcoin Payments, Ethereum PaymentsUSD, EUR
Here is a short summary of why we think each broker belongs in this top list:
- NinjaTrader - You can get exposure to micro Bitcoin futures through the CME Group’s centralized exchange, which is highly regulated by the US CFTC. Micro contracts allow you to trade a fractional size of one Bitcoin, giving you more risk control and order flexibility.
- Interactive Brokers - IBKR lets you purchase and hold Bitcoin, Bitcoin Cash, Ethereum, and Litecoin at competitive commission rates and without needing a crypto wallet. Additionally, there is a range of other diverse assets to explore, such as crypto indices like the NYSE Bitcoin Index, as well as futures contracts like the BAKKT Bitcoin Futures.
- eToro USA - eToro US offers 24 tradeable cryptoassets, with just a 1% buying/selling fee added to the spread. Additionally, there are 80 different coins available through the broker’s proprietary wallet service. You can also practice your crypto strategies easily by switching between live and demo mode. Crypto asset investing is highly volatile and unregulated. No consumer protection. Tax on profits may apply.
- OANDA US - Cryptocurrency trading is offered via Paxos, a separate entity from Oanda. You can speculate on the world’s biggest cryptos by market cap. Commissions are lower than many peers starting at 0.25%. Through the broker’s partnership with Paxos, clients can spot trade cryptocurrencies on the itBit exchange through the OANDA native platform.
- Uphold - You can buy and sell 250+ crypto assets with fiat currencies or in crypto pairs using the straightforward mobile app or through Uphold's browser-based account homepage. This is significantly more than many rivals. You can also earn up to 16% APY by staking one or more out of 32 valid tokens, or send tokens to an external wallet.
- IQCent - IQCent offers 17 crypto pairs through its proprietary terminal, including Bitcoin, Ethereum and Litecoin. Leverage on crypto CFDs is capped at 1:10, whilst binary options payouts vary by token but remain competitive. OTC assets, for example, pay out up to 95%.
- IG - IG's modest selection of 11 crypto CFDs trails top crypto brokers like Vantage which offers 40+ tokens. That said, it stands out with its crypto index, which tracks the value of the top 10 digital currencies by market cap and provides a holistic way to speculate on the value of the crypto market.
- Coinexx - Trade CFDs on BTC, ETH, LTC and XRP with 1:5 leverage, market execution and 0.01 micro lot trading. However, we weren't impressed with the narrow choice of cryptos with no emerging, smaller-cap tokens available.
- Capitalcore - Capitalcore allows traders to speculate on the price movements of just five cryptocurrencies through CFDs. Popular options like Bitcoin (BTC/USD), Ethereum (ETH/USD), and Litecoin (LTC/USD) are available. However, unlike competitors like eToro, you cannot purchase the underlying crypto directly.
- Plexytrade - Plexytrade lets traders capitalize on the inherent volatility of the cryptocurrency market by offering leveraged trading on 5 popular cryptocurrencies, including Bitcoin. However, the threadbare offering of digital tokens seriously trails leading brokers like Eightcap with its 100+ crypto derivatives.
NinjaTrader
"NinjaTrader continues to meet the demands of active futures traders looking for low fees and premium analysis tools. The platform hosts top-rate charting features including hundreds of indicators and 10+ chart types."
Tobias Robinson, Reviewer
NinjaTrader Quick Facts
Coins | BTC |
---|---|
Crypto Mining | No |
Auto Market Maker | No |
Crypto Spread | Floating |
Crypto Lending | No |
Crypto Staking | No |
Platforms | NinjaTrader Desktop, Web & Mobile, eSignal |
Minimum Deposit | $0 |
Regulator | NFA, CFTC |
Account Currencies | USD |
Pros
- Low fees are offered, with $50 day trading margins & commissions from $.09 per micro contract
- NinjaTrader is a widely respected and award-winning futures broker and is heavily authorized by the NFA and CFTC
- You can get thousands of add-ons and applications from developers in 150+ countries
Cons
- There is a withdrawal fee on some funding methods
- The premium platform tools come with an extra charge
- Non forex and futures trading requires signing up with partner brokers
Interactive Brokers
"Interactive Brokers is one of the best brokers for advanced day traders, providing powerful charting platforms, real-time data, and customizable layouts, notably through the new IBKR Desktop application. Its superb pricing and advanced order options also make it highly attractive for day traders, while its diverse range of equities is still among the best in the industry."
Christian Harris, Reviewer
Interactive Brokers Quick Facts
Coins | BTC, LTC, ETH, XRP |
---|---|
Crypto Mining | No |
Auto Market Maker | No |
Crypto Spread | 0.12%-0.18% |
Crypto Lending | No |
Crypto Staking | No |
Platforms | Trader Workstation (TWS), IBKR Desktop, GlobalTrader, Mobile, Client Portal, AlgoTrader, OmniTrader, eSignal, TradingCentral |
Minimum Deposit | $0 |
Regulator | FCA, SEC, FINRA, CFTC, CBI, CIRO, SFC, MAS, MNB, FINMA, AFM |
Account Currencies | USD, EUR, GBP, CAD, AUD, INR, JPY, SEK, NOK, DKK, CHF, AED, HUF |
Pros
- IBKR is one of the most respected and trusted brokerages and is regulated by top-tier authorities, so you can have confidence in the integrity and security of your trading account.
- With low commissions, tight spreads and a transparent fee structure, IBKR delivers a cost-effective environment for short-term traders.
- The new IBKR Desktop platform takes the best of TWS while adding bespoke tools like Option Lattice and Screeners with MultiSort to create a genuinely impressive trading experience for day traders at every level.
Cons
- Support can be slow and frustrating based on tests, so you might find it challenging to reach customer service representatives promptly or encounter delays in resolving issues.
- IBKR provides a wide range of research tools, but their distribution across trading platforms and the web-based 'Account Management' page lacks consistency, leading to a confusing user experience.
- TWS’s learning curve is steep, and beginners may find it challenging to navigate the platform and understand all the features. Plus500's web platform is much better suited to new traders.
eToro USA
"eToro remains a top pick for traders looking for leading social investing and copy trading services. With a low deposit, zero commissions and an intuitive platform, the broker will meet the needs of newer day traders."
Jemma Grist, Reviewer
eToro USA Quick Facts
Bonus Offer | Invest $100 and get $10 |
---|---|
Coins | BTC, ETH, BCH, DASH, LTC, ETC, MIOTA, XLM, EOS, NEO, ZEC, XTZ, MKR, COMP, LINK, UNI, YFI, DOGE, AAVE, ALGO, MANA, ENJ, BAT, MATIC, FLR, SHIBxM |
Crypto Mining | No |
Auto Market Maker | No |
Crypto Spread | BTC 0.75% |
Crypto Lending | No |
Crypto Staking | No |
Platforms | eToro Trading Platform & CopyTrader |
Minimum Deposit | $100 |
Regulator | SEC, FINRA |
Account Currencies | USD |
Pros
- The broker's Academy offers comprehensive learning materials for beginners to advanced-level investors
- The online broker offers an intuitive social investment network with straightforward copy trading on cryptos
- eToro USA Securities is a trustworthy, SEC-regulated broker that is a member of FINRA and SIPC
Cons
- There's no MetaTrader 4 platform integration for traders who are accustomed to using third-party charting tools
- The proprietary terminal doesn't support trading bots and there are no additional stock market analysis tools
- Average fees may cut into the profit margins of day traders
OANDA US
"OANDA remains an excellent broker for US day traders seeking a user-friendly platform with premium analysis tools and a straightforward joining process. OANDA is also heavily regulated with a very high trust score."
Jemma Grist, Reviewer
OANDA US Quick Facts
Coins | BTC, ETH, LTC, BCH, PAXG, LINK, UNI, AAVE |
---|---|
Crypto Mining | No |
Auto Market Maker | No |
Crypto Spread | $100 |
Crypto Lending | No |
Crypto Staking | No |
Platforms | OANDA Trade, MT4, TradingView, AutoChartist |
Minimum Deposit | $0 |
Regulator | NFA, CFTC |
Account Currencies | USD, EUR, GBP, CAD, AUD, JPY, CHF, HKD, SGD |
Pros
- The proprietary OANDA web platform continues to deliver a highly competitive charting environment, including 65+ technical indicators powered by TradingView
- OANDA is a reliable, trustworthy and secure brand with authorization from tier-one regulators including the CFTC
- Beginners can get started easily with $0 minimum initial deposit
Cons
- The range of day trading markets is limited to forex and cryptos only
- There's only a small range of payment methods available, with no e-wallets supported
- It's a shame that customer support is not available on weekends
Uphold
"Uphold remains a top choice for crypto investors looking for a one-stop-shop solution to accessing the markets. There are over 250 tokens to buy, sell and trade through flexible platform options."
William Berg, Reviewer
Uphold Quick Facts
Coins | BTC, BTCO, AAVE, ALCX, DYDX, INH, XYO, API3, GHST, LSK, AUDIO, GLMR, NMR, CAKE, GODS, REQ, CHR, TRB, DAO, ROOK, XRP, ETH, BAT, ADA, ALGO, ATOM, AVAX, AXS, BCH, BAL, BTG, CSPR, COMP, CRV, DASH, DCR, DGB, DOGE, DOT, EGLD and many more |
---|---|
Crypto Mining | No |
Auto Market Maker | No |
Crypto Spread | Up to 1.5% |
Crypto Lending | No |
Crypto Staking | Yes |
Platforms | Desktop Platform, Mobile App |
Minimum Deposit | $0 |
Account Currencies | USD, EUR, GBP |
Pros
- The proprietary app is extremely easy to use with a slick design and navigation
- UK users can get the Uphold card with up to 2% cashback in XRP
- Over 250 cryptos are available including major tokens like Bitcoin and Ethereum
Cons
- Customer service is slow based on tests, with limited contact options
- There is a 2.49% fee if you want to use debit or credit cards
- Uphold operates with limited regulatory oversight
IQCent
"IQCent will appeal to day traders looking for a straightforward binary options and CFD trading platform with low fees, a range of accounts, and copy trading. Getting started takes less than 1 minute and a $250 deposit. "
Jemma Grist, Reviewer
IQCent Quick Facts
Bonus Offer | 20% to 200% Deposit Bonus |
---|---|
Coins | BTC, ETH, LTC, ETC, DOGE, MATIC, QNT, SOL, XRP, USDT, XMR, BNB |
Crypto Mining | No |
Auto Market Maker | No |
Crypto Spread | Variable |
Crypto Lending | No |
Crypto Staking | No |
Platforms | Online Platform, TradingView |
Minimum Deposit | $250 |
Regulator | IFMRRC |
Account Currencies | USD, EUR |
Pros
- CFD trading fees are competitive based on tests, including 0.7 pips on major forex pairs such as EUR/USD
- The broker's 24/7 customer support is fast and reliable, responding within 1 minute during tests
- The proprietary terminal offers TradingView-powered charts which deliver dozens of technical indicators and studies
Cons
- IQCent trails binary brokers like Quotex with its narrow investment offering of around 100 assets with no stocks
- The broker is not overseen by a respected regulator, though this is common among binary options firms
- There's no automated trading support for algo traders
IG
"IG continues to provide a comprehensive package with an intuitive web platform, best-in-class education for beginners, advanced charting tools bolstered by its recent TradingView integration, real-time data, and fast execution speeds for experienced day traders."
Christian Harris, Reviewer
IG Quick Facts
Coins | BTC, BCH, LTC, ETH, ADA, DOT, DOGE, LINK, UNI, XLM |
---|---|
Crypto Mining | No |
Auto Market Maker | No |
Crypto Spread | Variable |
Crypto Lending | No |
Crypto Staking | No |
Platforms | Web, ProRealTime, L2 Dealer, MT4, TradingView, AutoChartist, TradingCentral |
Minimum Deposit | $0 |
Regulator | FCA, ASIC, NFA, CFTC, DFSA, BaFin, MAS, FSCA, FINMA, CONSOB, AFM |
Account Currencies | USD, EUR, GBP, CAD, AUD, JPY, ZAR, SEK, DKK, CHF, HKD, SGD |
Pros
- The ProRealTime advanced charting platform is free as long as certain modest monthly trading activity requirements are met.
- As a well-established broker, IG operates under strict regulatory guidelines in multiple jurisdictions, maintaining a high level of trust.
- The IG app offers a superb mobile trading experience with a clean design that helped it secure Runner Up at our 'Best Trading App' award.
Cons
- Beginners might find IG’s fee structure complex, with various fees for different types of trades or services, potentially leading to confusion or unexpected charges.
- IG has discontinued its swap-free account, reducing its appeal to Islamic traders.
- While there is negative balance protection in the UK and EU, there is no account protection or guaranteed stop losses for US clients.
Coinexx
"Coinexx best serves short-term traders willing to foregoes regulatory protections in return for highly-leveraged CFDs and trading accounts, deposits and withdrawals processed in cryptos like BTC. "
Tobias Robinson, Reviewer
Coinexx Quick Facts
Bonus Offer | 100% Deposit Welcome Bonus |
---|---|
Coins | BTC, ETH, LTC, XRP |
Crypto Mining | No |
Auto Market Maker | No |
Crypto Spread | From 0.0 pips |
Crypto Lending | No |
Crypto Staking | No |
Platforms | MT4, MT5 |
Minimum Deposit | 0.001 BTC |
Account Currencies | USD |
Pros
- Coinexx uses an ECN model that facilitates ultra-tight spreads from 0 pips, which alongside high leverage up to 1:500, may serve fast-paced, high-volume trading strategies.
- The virtual private server (VPS), hosted near the firm’s data center in Amsterdam, offers 24/7 connectivity, low latency and 99.99% uptime, catering to algo traders.
- Coinexx is one of a limited pool of brokers to support the ActTrader platform, which is highly customizable with detachable widgets, as well as 48 indicators, 11 timeframes, and price quotes up to 8 decimal places.
Cons
- Although it supports near-instant account funding in 25+ cryptos, the absence of fiat deposit options at Coinexx will be severely limiting for many traders.
- Aside from 7 calculators (forex, margin, pip, currency, commission, swap, PnL), Coinexx offers very little in terms of additional tools, with no education or research features to support traders.
- Despite operating for over 7 years, Coinexx still hasn’t secured any regulatory approvals, respected industry awards or the full confidence of our experts.
Capitalcore
"The major selling points of Capitalcore are its high leverage options up to 1:2000 and zero commission or swap fees. However, its weak regulatory oversight from the IFSA and non-existent education place it far behind the top brokers."
Christian Harris, Reviewer
Capitalcore Quick Facts
Bonus Offer | 40% Deposit Bonus up to $2,500 |
---|---|
Coins | BTC, ETH, BCH, XRP, LTC |
Crypto Mining | No |
Auto Market Maker | No |
Crypto Spread | $45 |
Crypto Lending | No |
Crypto Staking | No |
Platforms | WebTrader, Pro |
Minimum Deposit | $10 |
Regulator | IFSA |
Account Currencies | USD |
Pros
- Unlike most brokers, Capitalcore offers an unlimited demo account that takes under 5 minutes to open.
- The Capitalcore platform provides comprehensive charting tools and a wide range of 150+ technical indicators, ideal for detailed market analysis.
- The support team are available 24/7 and responded within minutes during testing with helpful responses.
Cons
- Platform support is limited to proprietary software, so there's no integration with the market-leading MetaTrader or cTrader, which offer built-in economic news and support automated trading.
- Capitalcore’s threadbare education and research seriously trail category leaders like IG, making it less suitable for aspiring traders.
- Capitalcore is not regulated by major financial authorities and has an unproven reputation, raising concerns about the safety of client funds.
Plexytrade
"Plexytrade is a newcomer in the brokerage scene with attention-grabbing features like 1:2000 leverage, zero spreads on select instruments and fast execution speeds of less than 46 milliseconds. However, the absence of regulation is a significant concern, while the non-existent research and educational tools place it far behind industry frontrunners."
Christian Harris, Reviewer
Plexytrade Quick Facts
Bonus Offer | 120% Cash Welcome Bonus |
---|---|
Coins | BTC, ETH, LTC, SOL, XRP |
Crypto Mining | No |
Auto Market Maker | No |
Crypto Spread | 1.1 |
Crypto Lending | No |
Crypto Staking | No |
Platforms | MT4, MT5 |
Minimum Deposit | $50 |
Account Currencies | USD, EUR |
Pros
- Plexytrade offers among the highest leverage we’ve seen, up to 1:2000, catering to advanced traders willing to forego regulatory protections.
- There are various VPS packages starting from $50 per month, but they become complimentary once specific deposit thresholds are reached.
- Despite lacking regulation, Plexytrade provides negative balance protection and reinforces safety protocols by holding client funds in segregated accounts.
Cons
- Plexytrade lacks regulation in major jurisdictions, significantly increasing the risks of opening an account and depositing funds.
- With around 100 instruments, Plexytrade restricts the flexibility of investors who prefer to trade across various assets, especially compared to Blackbull with its 26,000 securities.
- Deposits and withdrawals are exclusively facilitated through cryptocurrencies, as Plexytrade does not support bank cards, bank wire transfers, or e-wallets.
What Is Crypto Arbitrage?
Cryptocurrency arbitrage is a specific form of financial arbitrage that capitalises on crypto volatility, liquidity and decentralisation. Arbitrage trading is a strategy that takes advantage of market inefficiencies and price differences across different markets and/or assets. Specifically, it looks carefully at the rates offered by exchanges to find ways to make a profit by quickly trading in a loop.
Different exchanges will have different numbers of buyers and sellers, different trading preferences and different specialisms. This helps ensure that some inconsistencies occur between spot rates for different markets or instruments, such as Bitcoin.
Types Of Crypto Arbitrage
Spatial Crypto Arbitrage
Perhaps the simplest and most common method is spatial arbitrage. This involves looking at one instrument on two different exchanges. If these exchanges list the crypto at different prices, traders can buy from the cheaper exchange and immediately sell from the more expensive one, instantly making money from the discrepancy.
The easiest way to do this is to buy, let’s say Ethereum, from one exchange, transfer it to another and then sell it. Unfortunately, this is inefficient, both taking extra time to complete the transfer and incurring additional charges.
To avoid this issue, traders can hold their fiat currency in one exchange and their crypto in the other. When the opportunity presents itself, the same buy and sell order can be placed at the same time across the two exchanges. This would give the trader additional fiat currency while maintaining the same crypto capital. This method performs trades without transferring from one exchange to another, taking less time and incurring fewer fees.
Triangular Arbitrage
Triangular crypto arbitrage is a little more complex, involving three trades instead of two, all of which are usually carried out on the same exchange. This method looks at three different cryptos, trading through each of them until you are back to the original asset.
For example, a trader might spot an opportunity in Bitcoin and Ethereum exchange rates. They could then exchange their Bitcoin for Ethereum, which could then be traded for Ripple and finally back to Bitcoin. If the spot rates are inconsistent, the trader could end up with more Bitcoin than they had initially owned, despite trading around a loop.
Flash Loan Arbitrage
A slightly trickier form of crypto arbitrage, flash loan arbitrage, takes advantage of the advanced technology behind altcoins and lending approaches. Flash loans are instant cryptocurrency loans that allow traders to borrow large amounts of digital coins without any collateral. This presents a lending arbitrage opportunity to take advantage of differences in interest rates by flash loan providers.
Other Arbitrage Methods
Arbitrage goes beyond the strategies explained above, providing opportunities to traders both inside and outside of the altcoin world. Crypto derivatives arbitrage works in the same way as those, though it uses securities and derivatives of digital currencies, rather than the tokens themselves. One method that is common among hedge funds is to buy cheap stocks of companies before a merger when the market is inefficient and unsure.
Benefits Of Crypto Arbitrage
Fast Profits
Crypto arbitrage stands above many trading strategies in how quickly profits are realised. Exploiting the price inconsistencies over such short periods means that profits are made as soon as the transactions and trades have gone through.
Opportunities
Cryptos provide a wide range of arbitrage opportunities. With over 500 exchanges and more than 4,000 cryptocurrencies around the world, the likelihood of altcoin arbitrage opportunities presenting themselves is huge.
Volatility
One of the reasons for the popularity of cryptocurrencies in the trading world is the consistently high levels of volatility they demonstrate, even Bitcoin, which has been around for over a decade. The decentralisation and proof systems of cryptos help to ensure varying levels of supply and demand, keeping volatility high. This volatility is great for crypto arbitrage, as the more that prices change, the more likely it is that markets will show inconsistent rates.
Immaturity
The relative youth of cryptocurrencies and their development help create irregularities and disjointedness between exchanges as support networks are less well established. This increases the number of crypto arbitrage opportunities that are created.
Competition
While cryptocurrencies have shot up in popularity and fame, they are still traded significantly less than fiat currencies. This means that there is less competition for crypto arbitrage than there is for other, more popular financial instruments.
Price Differences
A major feature of crypto arbitrage versus regular arbitrage is the size of the price differences that appear. Digital currency inconsistencies tend to range from 3% to 5%, however, there are occasions when opportunities have been as large as 40%.
Risks Of Crypto Arbitrage
Regulation
While there are hundreds of crypto exchanges and thousands of currencies out there, some know your customer (KYC) regulatory restrictions may limit the number available to you. Some exchanges may require proof of identity or even an open bank account in that country before approving an account.
Fees
While it is a simple process to wrap your head around and try to calculate potential profits, fees could limit the profitability of arbitrage opportunities. Calculations should consider deposit and withdrawal fees, both in fiat and cryptocurrencies, as well as trading charges implemented by the exchange.
Security
While it is most profitable to store some assets on all your viable exchanges to reduce the overall time requirement, this can increase your security risk. Holding capital in many different wallets and accounts produces a larger risk of being hacked for at least one of them.
Volume Requirements
The relatively small profit percentages that are available with crypto arbitrage often mean that large amounts of capital are required for each opportunity to produce meaningful profits.
Timing
Crypto arbitrage opportunities are quick to appear and resolve. The short lives of these opportunities mean that traders must be on the ball to take advantage of them. This can be tricky, especially with the long transaction and verification times associated with crypto mining in some blockchains.
Crypto Arbitrage Bots
The need for low latency, calculations and trade placement can make crypto arbitrage a tricky business. Therefore, most traders have moved towards automated arbitrage, utilising bots (robots) and software tools to maximise their chances of success.
There are two routes that traders can go down with automated crypto arbitrage, purchasing a pre-made bot online or writing their own. There are many bots available on the internet, you may have heard of Dex Analysis. Each bot will have different specialisms and approaches, so traders should ensure they carry out detailed comparisons and fully understand the methods being implemented by a trading bot before entrusting their money to it. It is also a good idea to check reviews of arbitrage bots to check their returns are as stated.
For those Bitcoin traders who prefer to be more in control, all it takes is a little programming know-how and some time to develop your own bot. There are plenty of ‘how to’ guides and tutorials online for building trading bots and most crypto exchanges support APIs, which allow integration of home-written software. The development of a bot’s formula can be done relatively easily, with some capable of basing their actions on Excel spreadsheets and calculators.
Unfortunately, as is the way with all things, some resources online are a bit more malicious. Some trading forums, arbitrage signals providers and bots are attempting to take advantage of vulnerable traders. For example, the Crypto Arbitrage VIP software supposedly offers a 340% return, however, many reviewers have highlighted its illegitimate nature.
Crypto Arbitrage Software & Tools
Beyond the realm of automated trading bots, crypto arbitrage can be supplemented and aided with many other tools and pieces of software. Many companies offer a range of additional services, such as live charts, scanners and finders that monitor and screen opportunities, sending alerts to traders on helpful dashboards, such as the Telegram bot.
Crypto arbitrage can also be done without the use of a computer thanks to apps like Crypto Arbitrage Pro APK. These have in-built matrixes and calculators produced by experts that provide traders with a medium for checking opportunities wherever they go.
What To Look For In Crypto Arbitrage Platforms
An important consideration for prospective arbitrageurs is which platform would suit your needs. There is no objectively best crypto arbitrage website or platform, as every trader will have different needs, and there are many available.
While you could work over many general platforms, assessing profitability across several windows, this is a slow process. It is often better to find a platform that is connected to a range of platforms, allowing the much easier establishment of arbitrage opportunities.
The top platforms will also support automated arbitrage, either with dedicated APIs to support external bots or even built-in tools, trackers and auto trading bots that come with the platform.
To maximise profits, especially given the small margins of crypto arbitrage, traders should search for a platform with a range of deposit and withdrawal methods, as well as low fees. This allows traders to withdraw raw profits, instead of having to exchange again for withdrawable currencies.
Final Word
Cryptocurrency arbitrage is an opportunity for traders unlike any other. Traditional arbitrage has been declining with better networks and tighter regulations. The decentralisation of cryptocurrencies such as Bitcoin, however, provides consistent volatility and opportunity for those who know where to look.
Whether on a single exchange or over hundreds of them, traders can carry out crypto arbitrage manually or with the help of robots. However, care should always be taken when capital is at risk; ensure to read reviews, understand what is being offered and maintain the security of funds to make sure that profits are not jeopardised.
FAQ
Does Crypto Arbitrage Work And Is It Profitable?
Crypto arbitrage can work; its popularity is not baseless. It is important, however, to ensure that all fees are considered in profit calculations and to understand that there may well be times when the opportunity will close too quickly to be exploited.
Is Crypto Arbitrage Legitimate?
Many people doubt the legality of crypto arbitrage; however, it is perfectly legal as traders are simply capitalising on inefficiencies in the market. This is also beneficial as it helps to close these discrepancies quickly, improving the efficiency of crypto markets.
What Is A Crypto Arbitrage Bot?
Bots are pieces of software that are written to automate processes that would otherwise be time-consuming and difficult. Bots are generally written in Python for cryptocurrency arbitrage and can be found on the internet, sometimes even for free. Bots are especially useful for crypto arbitrage as there is such a small timeframe of profitability.
Where Can I Learn About Crypto Arbitrage?
There are many guides online that lay out crypto arbitrage, its various strategies and the algorithms that bots are based on. Some websites, like Crypto University, offer training courses, calculators and helpful YouTube videos.
Can You Carry Out Crypto Arbitrage In Nigeria?
Yes, crypto arbitrage is available in all countries with access to crypto exchanges, whether local or abroad. For example, a Korean trader could use the internet to assess an opportunity between exchanges in India and South Africa, so long as they can open accounts there.