Arbitration on cryptocurrencies and whether it is worth using it
Arbitrage trading of any financial instruments is the most attractive way to make money on decentralized markets.
This tactic is especially popular among traders who trade popular cryptocurrencies on Forex.
Although quotes for liquid currency pairs are provided by the Chicago Futures Exchange, they may vary significantly
brokers The permissible error range varies within 10 points.
Experienced traders can use this effectively in short-term trading. Cryptocurrency trading is developing extremely rapidly, but the cost of digital financial instruments is still not regulated by government or other competent structures.
The lack of price regulation for cryptocurrencies ensures extremely high volatility of these instruments, which can reach several thousand points per day.
A successfully opened trade can allow a trader to either double the initial investment or lose a large part of the capital.
In addition, altcoins are practically resistant to conventional analytical methods that allow predicting potential value.
Therefore, trading cryptocurrencies is extremely risky even without leverage. These factors determine the high popularity of arbitrage trading strategy , since its use involves minimal risks or their complete absence.
What is the essence of arbitration and is it worth applying this method in practice? Reasoned answers will be presented below. Beginner traders and interested users are recommended to read the material to the end.
What is arbitration and how to make money from it?
The decentralized nature of the cryptocurrency market as a whole has created favorable conditions for the formation and rapid development of many specialized trading platforms in the countries of the Asian region, the EU and the USA.
It is noteworthy that the price of a particular altcoin on one exchange can differ significantly from its price on another.
For example, it is recommended to pay attention to the current ETH (Ethereum) exchange rate:
Such information summaries are published and regularly updated on specialized websites and are available for free viewing.
The maximum price for Ethereum on the BitLish platform is 207.5 USD per coin. Trading volume is over 5,000 altcoins per day, which is significantly below average.
The minimum price is set on the GateCoin exchange – 141 USD per coin. This cost is due to the complete lack of trade turnover. It should be said right away that such a price range is extremely rare.
On average, the difference does not exceed 10 USD. This figure should be used as a starting point for calculations. The earning mechanism is quite simple: buy cheaper and sell more expensive on a second site, making a profit from the price difference.
In reality, everything is not so simple. The use of arbitrage trading in practice is complicated by a number of factors: Commissions of the exchange and exchange services for each transaction (purchase of cryptocurrency on one site, withdrawal to a wallet, replenishment of an account on another site, sale of altcoins and withdrawal of fiat funds).
The rules of not all specialized exchanges provide for replenishing the internal balance and withdrawing funds in fiat money.
Commission fees are the main problem of arbitrage trading:
The market value of Ethereum at the time of writing is about 12,600 RUR, while on an exchange service with the most loyal commissions, 1 ETH can be purchased for 15,000 RUR, which is significantly higher than the exchange price of the altcoin.
To this should be added 0.1 ETH - the total commission of exchanges for carrying out transactions.
Thus, even if you manage to earn 10 USD (650 RUR) by selling ETH, this profit will not even compensate for half of the commission costs. Conclusion
Based on objective data, it is logical to conclude that today making money on arbitrage trading in cryptocurrencies is no longer relevant.
All profits will be used to offset commission costs. It is recommended to consider the purchase of altcoins exclusively as passive , long-term investments.