Cryptocurrency Arbitrage: How to Earn Without Extra Risk

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Last updated November 25, 2024

Guide

Honestly, this market has always frustrated me with its unpredictability. But when I discovered crypto arbitrage, everything changed. It's like finding a loophole in the system — simple, yet effective! Let's talk about how to make money from this without risking all your savings.

When we think about making money in the cryptocurrency market, the first thing that comes to mind is to buy low and sell high. But is that the only way to make money in this field?

Of course not, damn it! Trading offers a ton of other opportunities. If you're tired of endless charts and risk management strategies, crypto arbitrage might be just what you need.

The Essence of Arbitrage Trading

Crypto arbitrage is a strategy based on using different rates of the same coin. Prices differ due to imbalances in supply and demand. You can use this difference to earn with almost no risk.

Unlike regular trading, where you need to understand fundamental analysis, technical indicators, or market sentiments, it's much simpler here.

The main thing is to seize the moment and act quickly. Prices change every second, so you need to move. When you master arbitrage, the most important thing is to notice the price difference before it disappears.

Types of Crypto Arbitrage

1. Cross-exchange Arbitrage

It's simple here — you buy on one platform, sell on another. It's divided into three types:

I. Standard Arbitrage

You buy and sell on different exchanges, making money on the difference. For example, imagine:

• On one platform, BTC costs $21,500
• On the other — 21,000$

You buy where it's cheaper, sell where it's more expensive, and your pocket gets heavier by $500 ( minus the fees, of course ).

But such fat opportunities are rare. Most pros keep their money on several exchanges and use API keys for automated trading. Some even set up bots — smart, damn it!

II. Spatial Arbitrage

The same thing, but between exchanges in different countries. In South Korea, for example, prices can sometimes be higher by 600%, as was the case with Curve Finance in July 2023. Can you imagine! The only downside is that many local exchanges do not allow foreigners.

III. Decentralized Arbitrage

Here we play on the price differences between decentralized exchanges and regular ones. On DEX, prices are set by automated market makers, which sometimes yield amusing results.

2. Intra-exchange Arbitrage

Here we operate within a single exchange:

I. Arbitrage of financing fees

The essence is that in futures, traders pay each other commissions for financing positions. Usually, longs pay shorts. The trick is to create a hedged position:

1. Buy the coin on spot
2. Open a short position with 1x leverage on futures
3. Receive funding while the rate is positive

It's like a stable salary — small, but regular and almost risk-free.

II. Arbitrage P2P

On P2P markets, people trade directly with each other. The essence of arbitrage here lies in the difference between buying and selling prices:

• You find a coin with a large price spread.
• You post ads for buying at a low price and selling at a high price.
• Waiting for someone to bite

But be careful with fees and unreliable counterparties — there are many scammers here!

3. Triangular Arbitrage

This is for advanced guys. You use price differences between three different coins, making a chain of transactions:

Option 1:

1. Buy BTC with USDT
2. Buy ETH with BTC
3. Sell ETH for USDT

Option 2:

1. Buy ETH with USDT
2. Sell ETH for BTC
3. Sell BTC for USDT

Is it complicated? You can use a bot, let it do everything for you.

4. Options Arbitrage

Everything here revolves around the difference between "expected volatility" and the actual price movement. When the options market misprices an asset, you can profit from it.

Advantages of Arbitrage Trading

• Quick profit: Money drips in minutes, not days or weeks
• Many opportunities: More than 750 exchanges, each with its own prices
• Few competitors: The market is still new, not everyone has gotten into this topic.
• Volatility in your favor: The more prices fluctuate, the more opportunities for arbitrage.

The Downsides They Don't Talk About

• Need bots: Manually often you can't keep up — prices level out faster than you can press buttons.
• Fees eat into profits: Trading, withdrawal, network — they're everywhere!
• Small margin: Without a large capital, you can't really go wild.
• Withdrawal limits: Many exchanges do not allow large amounts to be withdrawn immediately.

Why is it less risky?

It's simple. In regular trading, you're guessing on coffee grounds, trying to predict price movements. In arbitrage, you simply take advantage of the existing price differences — no predictions.

The deal lasts for a few minutes, not days or weeks. Less time means less risk. Yes, the profit is also modest, but it is more stable.

Are bots needed?

Yes, damn it! Arbitrage opportunities last for seconds or minutes. By the time you figure it out and calculate — everything has already disappeared. Bots scan the market 24/7 and can open trades instantly.

Most serious arbitrage traders use bots — it's like having a trading robot that never sleeps or eats.

Results

Arbitrage offers quick profits with minimal risk. But it's not a free ride — it requires knowledge, starting capital, and quick reactions.

The advantages are obvious — low risk, minimal analysis, quick money. There are also disadvantages — fees, modest profits, withdrawal limitations.

Bots make life much easier, but you need to choose them carefully. And remember — although the risk is lower here, it still exists. Don't dive into arbitrage with all your money at once!