4 Ways Traders Can Benefit From Cryptocurrency Arbitrage

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The cryptocurrency market may have started with humble beginnings with a market value of only a few dollars but over the years it has gradually progressed into one of the highest valued markets in today’s global economy. Those who had faith in the market early on and invested early in it are reaping their rewards now by being crypto billionaires.

These successful investors have inspired a variety of individuals from all across the world to start investing in cryptocurrency. If you too want to be one of them then we strongly recommend that you check out crypto-robopro.com/tr for doing so. Apart from investors, the cryptocurrency market has also attracted its fair share of traders.

There are several ways you can trade in cryptocurrency and one of the most popular ways of doing so is through crypto arbitrage. Cryptocurrency arbitrage basically means purchasing cryptocurrency on one online market and selling it on another. Since different exchanges have different prices for cryptocurrencies, crypto arbitrage can be one of the most viable ways of earning quick money for yourself.

There are several ways through which you can benefit from cryptocurrency arbitrage but you need to give precise attention to several aspects and consider several factors before doing so. Many people are not aware of these aspects and if you are one of them then don’t worry because we have you covered. In this article we will be listing several ways you as a trader can benefit from crypto arbitrage and what you should do.

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Selecting the right type of arbitrage strategy

Before you decide to indulge in this trading strategy, you need to know its various types and the advantage each of them offers so that you can find the right strategy for yourself. While there are several types of arbitrage strategies, the most popular ones are:

Cross-exchange arbitrage

This is the most basic trading strategy where you simply purchase crypto on one market and then sell it on another market by transferring the assets to the other exchange’s hot wallet.

Spatial arbitrage

This strategy is the same as its cross-exchange alternative with the only difference being that the trader utilizes the demand and supply in other countries for their own benefit by trading on two different region-based markets.

Triangular arbitrage

If a trader sees that there is a massive price movement between different cryptocurrencies on the same exchange, they have the option of utilizing that movement to their advantage using triangular arbitrage. This strategy basically implies creating a loop of buying and selling different cryptocurrencies with the loop ending up with the first cryptocurrency that was traded. With some luck and skill, the trader can end up getting a lot more cryptocurrency than what he sold.

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Ensuring low transaction fees on the exchange

Always factor in the transaction fees of the exchanges that you are going to use for your arbitrage. Many people make the mistake of thinking that the price change between two markets is the net profit they will earn from their strategy. This couldn’t be further from the truth because whatever profit you are getting from a price change will be liable to subtraction from the transaction fees you paid both the market.

To put it in simpler terms, imagine there is a price change of $100 between two markets on a select cryptocurrency – say XRP. So what you do is buy at the exchange that is on the lower end of the price spectrum, pay the transaction fee of depositing, transfer the amount to the other exchange’s wallet, sell your assets after paying the exchange’s transaction fee.

All in all, your total profit would be whatever you earned from your price change with the amount of transaction fees you paid subtracted from it. Fortunately, most markets don’t charge hefty transaction fees for altcoins and the only ones you should be careful about are Bitcoin and Ethereum.

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Being quick in trading

Arbitrage is completely dependent on a trader’s skill to trade a specific amount of cryptocurrency from one market to the other, or on the market itself, in a short amount of time before the price changes. Not executing the technique on time can lead to a sudden price shift in the cryptocurrency you are trading in which can cause you to lose out a lot of money.

Being quick in trading is an essential skill for this technique and one that you need to be well acquainted with before trying it out. If you haven’t already, build out a precise plan of how and when you will execute your arbitrage strategy. Going in without a solid plan can only end up with you losing out more than what you invested in.

This is especially necessary for people who have just started trading in the cryptocurrency market as a trader and don’t have much prior experience. Being quick with your decisions, tracking the different price changes on popular exchanges and then utilizing all the resources you have to facilitate faster transfers between your wallets is the key to availing benefits from the cryptocurrency arbitrage strategy.

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Using secure exchanges for trading

In today’s modern world, getting your cryptocurrency wallets hacked has become a relatively common occurrence. Hot wallets are especially vulnerable to this risk because of their online nature and lack of security. On the other hand, while cold wallets are extremely secure, traders can’t use them since they need seamlessness and easy access that are only offered by hot wallets.

That’s why it is essential that you use hot wallets that are based on secure exchanges and have a lesser chance of getting hacked by hackers. To do this, you need to research the exchanges adequately and choose the most secure option for yourself. Only exchanges that offer immense security benefits and lower the risk of getting hacked, all while maintaining improved functionality, should be your go-to option for cryptocurrency arbitrage.

Conclusion

There are several ways traders can benefit from cryptocurrency arbitrage and we hope this article helped you find most of them. If it did, please consider following our website for regular updates as it will help us out immensely.