A lot of people want to make money with cryptocurrency. There are numerous ways of doing so, although using a combination of different methods can yield the best results. It is also a bit more time-consuming. In this series, I will personally share my preparations and portfolio changes as different options are explored. The ultimate goal is to make $2,000 a month or more from exploring these opportunities.
An Arbitrage Adventure Begins
As is the case with any plan to make money – or at least, attempt to do so – one needs ample preparation to be successful. In the cryptocurrency world, there is no one-trick-pony which will automatically keep yielding money. Although I am a long-term holder at heart, there has always been a desire to explore different opportunities as well. Arbitrage trading, a topic discussed on this website every day, has certainly piqued an interest in this regard.
The main reason why arbitrage opportunities are of interest is easy to explain. First of all, there are always price gaps in between different currencies on different exchanges. That is the upside of a volatile cryptocurrency industry first and foremost. Second, this method does not require technical analysis. Although I intend to pursue gaining more knowledge in that regard as well, it is not the objective of this daily article series at this time.
Preparation Requires Patience
On paper, it sounds very easy to move funds from one exchange to the next. While that is certainly the bread and butter of arbitrage trading, one also needs funds on those exchanges in the first place. As a non-active trader, my funds sits either in a hardware wallet or pass through one exchange at most. For the time being, I am still in the process of setting up multiple exchange accounts with a balance of at least 0.1 BTC.
Speaking of using Bitcoin, it remains a very cumbersome experience. It is by far the least useful option of moving money to and from exchanges right now. One transfer yesterday took over two hours to hit six confirmations. That is another problem with some smaller exchanges, as they require six Bitcoin network confirmations. Exploring other options to move money between all exchanges – such as XRP or LTC – will be explored over the weekend.
The Plethora of Exchanges and KYC Procedures
In the world of cryptocurrency, using an exchange is very straightforward. When dealing with multiple exchanges – a must for anyone exploring arbitrage options on an active basis – that situation is a bit more complicated. Setting up unique passwords and 2FA for every exchange account can be quite time-consuming. It is a one-time “investment” one has to make, as account security should be everyone’s number one priority at all times. For me personally, any exchange not offering 2FA should be avoided at all costs. Luckily, most platforms actively offer such an option.
Another aspect to take into account is how one should complete a KYC verification process on every exchange one decides to use. This is not that big of a problem, as the same documents can be used for every platform. However, every exchange seems to request a third type of verification which is slightly different. Users are often advised to take a selfie and hold up a paper with the exchange name and their platform ID. A very positive change, in my humble opinion, although it adds to the time-consuming part as well.
Even though it would, in theory, be possible to sign up for every exchange out there, it is not necessarily something to do right away. Currently, my verified exchange accounts span Kraken, Poloniex, Bitstamp, and Exmo. The current goal is to get verified on Livecoin, CEX, Gate, and Binance as well. Other exchanges may be added over time, but these all seem to be the more common platforms for arbitrage opportunities in general. There is still a lot of work to be done over the weekend.
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