Initially, mankind had a very limited range of opportunities to earn a living: gathering, hunting, primitive farming. But as society evolved, new tools became available. One of them is cryptocurrency arbitrage. At first glance, it may seem like a common form of speculation. But what can you learn if you study it in more detail?
General information
When cryptographic money appeared, exchanges began to develop, offering their services for their purchase, sale and exchange. Moreover, these operations can be carried out both between virtual currencies (for example, bitcoin for litecoin), and conventional traditional ones, such as rubles, hryvnias, dollars, euros. On these exchanges, the rate is more or less similar, but, nevertheless, the differences can reach several percent.
Earn onCryptocurrency arbitrage involves buying at a low rate and selling at a higher one. Profit is the size of the difference. By the way, it is called arbitration. To earn in this way, you do not need to have special knowledge or skills. It is enough just to constantly monitor the value of rates on the main exchanges.
What should I pay attention to?
Here is a short list:
- Actually, the course itself.
- Fiat deposit or withdrawal fee. Here we should step back and make a little clarification. Cryptocurrencies are usually entered without commission. There is a small fee for withdrawal. Therefore, to avoid negative consequences, one should keep an eye on fiat.
- Know the list of exchange codes. We'll talk about this later.
Where to deploy activities?
On which platforms can I master the inter-exchange arbitrage of cryptocurrencies? It should be noted that there is a fairly wide potential field of work. But within the framework of the article, only the most popular ones will be given:
- BTC-E. This is perhaps the most popular Russian-language exchange. Its feature is, as a rule, a lower rate than on other trading floors.
- EXMO. An exchange where there is a large volume of trading, there is a significant difference between the sell and buy rate, and orders are quickly filled. It is quite good for beginners to earn initial capital.
- YoBit. A wide range of cryptocurrencies, there are bonus distributions. Considered the leader in the process of adding new positions.
- Livecoin. Quite extensiveRussian-language exchange.
- Btc-trade. Ukrainian project, works with hryvnias. It has good rates, it is much more profitable to work with it than through exchangers.
On these exchanges, you can monitor cryptocurrency rates in real time and when a profitable option appears to buy/sell them.
How to make money?
The most optimal way is to transfer funds between exchanges using special codes. On the positive side, there is no commission charged for their use, and transactions are carried out instantly.
The advantage of the codes is that they can work with both cryptocurrencies and traditional money. Also, keep in mind that they are disposable. Therefore, by activating the code, a person will say goodbye to the amount on one of his accounts. It should be noted that earnings in exchangers may have their pitfalls, for example, work not in automatic, but in manual mode. Therefore, such a service for cryptocurrency arbitrage is undesirable to use.
Example
Let's consider a situation that could potentially take place. Let's say that on EXMO bitcoin costs 400 thousand rubles. And on BTC-E it is traded for 396,000. What is the procedure? Initially, you need to deposit funds in BTC-E and buy one bitcoin in this way. After that, it is transferred to EXMO with the help of a code. At the same time, a commission of 0.001 BTC is charged for moving, as well as 0.2% for buying and selling. All that remainsafter the sale is the profit. In our case, it will be something about two thousand rubles. And then the most interesting begins - the cryptocurrency arbitrage itself.
First, you need to find the best way to get your money back on BTC-E. After that, the process is repeated. It should be noted that there may not be any profitable offers at a certain point in time. Therefore, it is necessary to track the rates of cryptocurrencies in real time in order to make money on them at the right time.
To fill your free time, you can trade currencies directly on the exchange itself. This is a classic arbitrage scheme. It is convenient due to long-term use and is the most popular interaction principle.
A little more about the classic scheme
If there is no desire to start trading without investing your funds, then the initial capital can be obtained on sites that distribute it for free. To do this, just register, work a little, and it will be available in a couple of days. Profit is formed directly due to the inefficiency of the sales system and the aggregation of price quotations. We can confidently say that there are minimal risks in the classical scheme. But they are still there, you should not forget about it.
We should also mention the minimum requirements for a successful start here (you can, of course, lower the bar, but then the effect will be minimal). So this is:
- Amount of funds forarbitration over six thousand rubles.
- Commissions for transactions, as well as transfers between exchanges, cost less than the profit received.
- Work during a low trading period to earn before a significant price change.
- It is desirable that the traded pair differ by more than two percent. The example above, where it was only 1%, should not be considered as a practical guide to action.
Static arbitrage earnings
This method requires analyzing the current state of the market, where the participant acquires the most promising asset in terms of growth. Here there is a risk of making the wrong choice, which will lead to financial losses. In general, this approach has much in common with trading strategies that rely on the calculation of possible profits. The main task in this process is to identify patterns and use them to your advantage. How is this cryptocurrency arbitrage implemented in practice?
First, you need to select a few dependent instruments, forming your trading portfolio. Then you should determine where there is an underestimation, and where there is an overestimation. And we buy what suits us. The effectiveness of this approach is relatively lower than when working according to the classical scheme. But the strategy is more flexible. Often the solution in this case comes down to the formation of a neutral portfolio, the price chart of which moves without strong jumps. Let's look at a small example.
Suppose the bet was placed on the statisticalpair arbitrage - litecoin and bitcoin. There is a high correlation between them. At the same time, there is a pattern - one currency goes up, the other goes down. Then they change places. Our task is to buy the catch-up currency and sell the leading one. At the moment of their contact, we close the deal. If there is an assumption that currency parity will be established, then this can be implemented without significant risk. But, alas, there is a minus here - the dependence is unstable and will not always work.
Using Automation Tools
All of the above assumes that the actions are performed by a human. But does it have to be like this? No, a special program for arbitrage on the cryptocurrency exchange can come to the rescue.
Moreover, automation tools are performed in a fairly wide range. This can be a bot for cryptocurrency arbitrage trading, and a program that will only report changes and / or reaching a certain level of quotes, and all decisions will be made by a person. The first option sounds the most attractive. But if automation were able to trade perfectly, then it would calmly oust all people - brokers and traders. There is a high chance of losing. Therefore, the most suitable option is a program with informing functions. And you will have to rely on your mind.
