by Elena Al
Despite the global pandemic and economic problems, people’s desire to make profits from digital assets is not going away. On the contrary, many are more interested in cryptocurrency. Have you ever heard of crypto arbitrage?
What is Bitcoin Arbitrage?
Before we explain what crypto (or bitcoin) arbitrage is, let’s look at the word “arbitrage”. Cambridge Dictionary defines arbitrage as “the method in the stock market of buying something in one place and selling something in another place at the same time in order to benefit from the price difference between the two places”.
Accordingly, bitcoin arbitrage is the process of buying bitcoins on one exchange at a low price and selling it on another exchange where the price is higher.
Just as there are various foreign currencies and exchange offices, there is also a Bitcoin exchange, which is a digital marketplace. The price of Bitcoin on each cryptocurrency exchange can be different and this is where the arbitrage phenomenon comes from.
The Reasons Many Are Ready To Try Bitcoin Arbitrage
(1) The speed and the profit. If all goes well, your money can be increased quickly.
(2) There are over 200 exchanges, so options are plentiful.
(3) There is less competition compared to traditional trading markets.
(4) Bitcoin price differences are between 3% and 5%, and in some cases the margins can be larger.
The possible obstacles to bitcoin arbitrage
Crypto arbitrage is still not as easy as it sounds. It’s a complicated process and there are certain risks involved. The following problems can arise in arbitration:
(A) The price of cryptocurrency may change while you wait for a transaction review. Yes, it takes time.
(B) If you are trading a large number of bitcoins, the verification process will be significantly more time consuming.
(C) The exchange process is not free. Transaction fees can affect the expected profit.
(D) The transaction volume must be high enough on every exchange, otherwise you may not be able to sell all the currencies that you bought on the cheaper exchange.
(E) Traders need to research the exchanges before actually trading. Some exchanges with low prices may have technical or trust issues.
Where does the Bitcoin price come from?
Usually the price of the cryptocurrency is determined by the last trade that took place on the exchange. There are many Bitcoin exchanges and each of them has a different number of buyers and sellers with different preferences.
So exchanges cannot have a fixed price for digital assets, but there is an order book (a list of all the prices at which other people are willing to buy or sell the assets).
Another factor that affects the value of digital coins is the news and global events. For example, last October, Bitcoin rose from $ 7,400 to $ 10,332 in just two days. Why? Many cryptocurrency market analysts attribute this sudden change to a speech by Chinese President Xi Jinping on October 25th.
Although cryptocurrencies have been banned in China since 2017, President Xi stated that the country “should seize the opportunity of blockchain technology” and “we must see blockchain as a major breakthrough for independent innovation of core technologies”. As a result, Chinese cryptocurrencies began to rise in price.
How to keep up with the news, track the best opportunities in the Bitcoin market, react quickly, and conduct profitable transactions? It is possible to do this manually, but successful arbitrraging is all about quick information and quick decisions. In doing so, you are competing with bots, and you may need one of your own.
The Arbitrage Cryptocurrency Bot
Arbitrage Cryptocurrency Bot is a tool that can help you make profit through arbitrage trading. Bots will certainly make your work easier. This bitcoin arbitrage bot software often provides statistical calculations to look for your potential opportunities. Some bots will examine your profile and point out risks that you can face when investing in the exchanges.
There are many bitcoin arbitrage bots available in the crypto market, which may have different main characteristics. In general, there are two types of bot: the cross-exchange arbitrage cryptocurrency bot and the triangle or cross-asset bot. The former bot checks the price differences between different exchanges, and the latter bot checks the prices of only one exchange.
These automated options (bots) are in great demand, but there are always risks. Those who choose to use arbitrage software need to be careful as there are many scammers out there ready to deceive traders.
The Crypto Arbitrage Process Explained
So you’ve decided to try your hand at trading. What do you have to do?
Step 1: Analyze and choose the most convenient and profitable crypto exchanges. Keep in mind that some exchanges can take several weeks to review and often a certain minimum deposit is required to start trading. Most exchanges will also ask you to pass KYC / AML.
It is better to register, verify and fund your accounts in fiat and cryptocurrencies on multiple exchanges. Once you start trading it will save you time.
Step 2: Before you try: calculate and plan as much as you can, evaluate fees or wallet costs, consider withdrawal and transfer time, market volatility, rules and conditions. Depending on the country’s legislation, some profits may be taxed.
Step 3: Find crypto arbitrage opportunities by tracking the price of cryptocurrencies on different exchanges. Bitcoin arbitrage bots also serve this purpose.
Step 4: Take action and continue your trading process or wait for another opportunity.
As you can see, this process requires a lot of effort, knowledge, investment and a developed strategy. If you decide to enter this cryptocurrency race with the help of bitcoin arbitrage software, your chances of success will increase.
Take into account all recommendations, do everything right, and you will become a worthy player in the cryptocurrency market.
I, Elena Al, am a technology lover exploring the possible implementations of novel technologies such as artificial intelligence, blockchain, and the Internet of Things. For more information on arbitrage cryptocurrency bots, visit my PixelPlex Site …
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