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Capturing profits with crypto arbitrage: calculations, not speculations

There are many different ways to earn money trading crypto and book profits over time. The ways to do this vary from the very complex which requires expertise down to the very simple tactics that basically anyone is able to do.

Arbitrage between crypto exchanges is one of the simplest tactics to skim profits using a very basic set up. All you need is access to at least two different exchanges, the more the better, and you’re good to go.

The basics of arbitrage

When you buy a coin on one exchange and then go on to another crypto exchange to sell it at a different price – or the other way around – you are performing crypto arbitrage. There will always be slight price differences between exchanges, and you capturing the profit between those prices by trading accordingly is crypto arbitrage. Price discrepancies are common to all coins, from Bitcoin to small cap coins.

The reason why there are price differences is actually quite simple. There are a lot of markets in across the world for BTC (BTC/USD, BTC/EUR, BTC/CNY, BTC/SGD, BTC/RUB, etc.) and while they all move in the same direction following the same price trends, they do not move in perfect tandem. When the BTC/USD market rises, BTC/SGD will follow the same trend, but probably not at the exact same time down to the second. This presents a trading opportunity which is very simple to capture: buy low at exchange X, sell high at exchange Y immediately after.

Unless you move substantial capital around, the profits won’t be huge but there is one major draw to this strategy: the profit is based on calculation rather than speculation.

Finding profitable arbitrage opportunities between crypto exchanges

Let’s say you want to find arbitrage opportunities trading Bitcoin.

Like we said in the intro, you need access to at least two different crypto exchanges, and the more the better. Open accounts both with larger popular exchanges and the smaller ones. The reason why is because the large crypto exchanges will see a lot price action and smaller ones less. When the price of Bitcoin climbs the charts, the large exchange will follow that much sooner than the small exchange will.

Another tactic is to look for price differences between geographic markets. The most famous example of how this works is the arbitrage opportunity that existed between Korea and the rest of the world in 2017. At the time, BTC in Korea was traded at 30% premium compared to anywhere else, so people could buy BTC in Hong Kong for example, and then sell it at 30% profit on a Korean crypto exchange.

Learn more about arbitrage:

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