Exploring arbitrage opportunities in the world of cryptocurrencies and digital assets is never a straightforward process. After all, everyone wants to maximize their profits first and foremost. Under the current bearish market conditions, that is easier said than done. As such, playing the intra-exchange arbitrage card can often be a much safer option.
What is Intra-Exchange Trading?
Although the name would potentially suggest otherwise, an intra-exchange trade revolves around exploiting different markets on the same platform. For example, exploring the ETN/BTC and ETH/TH markets on Cryptopia, as there is a price difference between the two. This makes it a bit easier to “cycle” funds, as it never leaves the exchange in question.
Is it Profitable?
That is not necessarily an easy question to answer. Depending on which exchange one uses – and which pairs one can exploit for minor price gaps – it can be a profitable form of arbitrage trading. At the time of writing, an opportunity popped up which resulted in a brief 14% gap between BTC and ETH markets for one particular coin. Those opportunities are extremely rare, as the average intra-exchange arbitrage gap is 1.5% or less.
Moreover, these gaps usually do not last all that long. After all, a lot of exchanges are subjected to various trading bots, most of which can easily detect these small price fluctuations and take advantage of them accordingly. As such, there isn’t any “major score” to be earned right away, but a lot of small trades between these different pairs on the same exchange can add up to decent lumps of money in the long run.
Potential Issues to Take Note of
As is always the case when one explores arbitrage opportunities of any kind, there are some caveats which can make this endeavor a bit riskier. First of all, intra-exchange opportunities usually occur on the smaller exchanges with far less liquidity. That makes it very difficult to move big amounts of funds around without overextending one’s position on the market. It is not uncommon for gaps to show up on Poloniex, Cex, Bittrex, and HitBTC, but it usually involves Exmo, Cryptopia, and so forth.
Secondly, using this approach can “lock up” funds used best for other arbitrage options. Especially those traders who want to explore triangular and loop arbitrage options should think twice about looking into intra-exchange offerings as well. It can be done when no other appealing opportunity presents itself, but that doesn’t mean one should chase after every price gap which presents itself either. Intra-exchange trading has its time and place, but it should never be the go-to option whatsoever.
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.
Image(s): Shutterstock.com