It is possible to profit from price differences between cryptocurrencies at the same time on different markets by arbitraging the assets. It is possible to track the rate difference manually, but it takes time. A more efficient and profitable solution is to use special software. You will learn in this article how to select cryptocurrency arbitrage software, which criteria you need to consider when choosing this technology, and which options are available at present.
Cryptocurrency Arbitrage – what is it?
Traders arbitrage assets by buying them in one place, quickly selling them in another, and profiting from the price difference. If, for example, one BTC token on Binance sells for $ 31,660, and one on Kraken costs $ 31,650, you might consider buying 10 BTC on Kraken and selling them on Finance, resulting in a profit of $ 100 (minus commissions). Speed is paramount here, since currency rates change extremely rapidly and you must be able to capitalize on the differences. To learn more, go to westernpips.pro.
Arbitration between cryptocurrency exchanges
Arbitrage is the process of buying an asset on one exchange and selling it on another exchange at the exact same time. Buying BTC tokens on Kraken and selling them on Binance is the same thing as what was described in the example above. Traders pick this approach because it is very similar to fiat currency arbitrage on Forex, as well as sports arbitrage.
In the event you wish to make money this way, then when choosing software for cryptocurrency arbitrage, you should keep in mind that in addition to the difference in rates, it should also track the commissions that should be paid, such as trading commissions as well as deposits / withdrawals on exchanges. By arranging for a certain amount of currency to be deposited in advance, you can reduce these fees.
Arbitrage in intra-exchange cryptocurrency
Using this solution, the arbitrageurs buy one asset, transfer it to another, then transfer it back to the first asset. When the market is inefficient, such an operation can be profitable, but if it is repeated several times, there is still the possibility of arbitrage.
With this approach, you must link the rates of several assets at the same time, while also taking into account the possibility that profitability will decrease with every next polygonal cycle. In other words, traders must be cautious and take their time to calculate risk/income correctly.
Traders who use the same polygonal strategy to deposit and withdraw cryptocurrency over and over again and remain within the same cryptocurrency exchange will not have to pay fees for cryptocurrency deposit / withdrawal.
Which cryptocurrency arbitrage software should you choose?
Having described what cryptocurrency arbitrage is and how it works, we can discuss the factors users must consider when selecting arbitration software. Also, it will not be superfluous to describe some of the popular trading programs.
Criteria to take into account
Money safety. Your keys to cryptocurrency wallets and / or your keys to your exchange accounts will be required for the software (bot) to trade on your behalf on cryptocurrency exchanges. It is unlikely that you will be able to recover your funds if this data falls into the hands of intruders.
Exchange integration. A good arbitrage software application should integrate with major crypto-exchanges. In fact, the more the better, since this increases the chances of spotting arbitrage opportunities.
Fees, commissions, and price. Another important consideration when choosing software for cryptocurrency arbitrage is the cost of the software and the transactions involved. Hence, find an arbitration application that will not charge you too much to download and use.