When it comes to making money with cryptocurrency arbitrage, there are a lot of factors to take into account. On the journey toward making $2,000 a month with cryptocurrency, numerous arbitrage opportunities can be explored. The direct trade is the most obvious option in this regard, although it is not always one’s best choice either.
The Direct Arbitrage Explained
When it comes to exploring direct arbitrage trading, the process itself is very simple. One buys a cryptocurrency or digital asset from exchange A at a low price, and attempts to sell it on exchange B for a higher value. Although this seems to make a lot of sense on paper, one has to keep in mind there is usually just a small gap waiting to be exploited. That gap, depending on overall platform liquidity, be explored repeatedly, although the profit margin will usually decrease every single time.
Is it Profitable?
The main question with arbitrage trading is whether or not it is profitable, or at least, profitable enough. The answer to this question is simple: yes, but there is a catch. More specifically, the vast majority of arbitrage opportunities will net a profit of 1% or slightly less. That is not necessarily something to get overly excited about, especially when dealing with smaller amounts. If one trades with just 0.1 BTC, a 1% gain will yield 0.001 BTC.
That may still be worth a lot of money to some, although at current values, it is just over $4. Additionally, one also has to keep in mind most exchanges still maintain some level of trading fees. Those fees will also cut into one’s potential profits, which can shake things up accordingly. Even when trading with 1 BTC – which is a pretty big gamble first and foremost, a 0.01 BTC profit may not necessarily be that appealing to most speculators. As such, the direct arbitrage is a good alternative, but it may not necessarily be the best option to make good money right away.
Frequent Opportunities for Small Gains
The major upside to direct arbitrage opportunities is how they are both frequent in number and often span across different exchanges. Although some key exchanges will pop up a lot more often than others, it is safe to say the direct arbitrage approach will also help users spread their holdings across many different trading platforms. It wouldn’t serve any real purpose to stick with just two or three exchanges, especially not when taking this concept seriously.
As we discuss on this website every single day, there are numerous direct arbitrage opportunities to be explored. Most of these options include the top altcoins and some major exchanges, which makes for easy profits to be scored. Additionally, there are gaps of up to 4-5% every day, depending on how much trust one wants to put in the smaller altcoin exchanges like Exmo and Cryptopia.
On a personal level, direct arbitrage opportunity will most likely never be the go-to solution to make money. It is always important to keep tabs on these opportunities, though, especially when the price gap surpasses the 2% mark. If no other decent opportunities arise, exploring a few direct trading opportunities can still let one make decent money. It does involve the use of many additional exchanges and getting KYC verified, though, which makes the initial setup a bit more time-consuming.
Disclaimer: This is not trading or investment advice. The above article is for entertainment and education purposes only. Please do your own research before purchasing or investing into any cryptocurrency.