The cryptocurrency market has varying prices for assets on different exchanges. These price differences allow traders to make profits by trading across various platforms.
In this article, we explore how to become a crypto arbitrageur.
What is crypto arbitrage?See our earlier article on crypto arbitrage for more perspectives.
Crypto arbitrage is a trading style that exploits the different prices of cryptocurrency assets to make a profit. It involves monitoring the price of cryptocurrencies across several exchanges and buying and selling them to increase your earnings.
Before getting started with crypto arbitrage, you should consider the following:
- Trading (maker and taker) fees on various exchanges.
- Deposit fees (mostly paid for fiat deposits).
- Withdrawal fees on various exchanges.
- Crypto regulations in your region (potential taxes).
- The volatility of currency pairs you intend to trade.
One of the most important factors is the cost that comes with using an exchange. It is essential to select an efficient platform to avoid spending most of your profits in paying fees.
AAX exchange is a great option to use for trading cryptocurrency. AAX charges a 0.06% marker fee and 0.1% taker fee. Also, a higher trading volume results in lesser trading fees. Compared to most exchanges, AAX has some of the lowest trading fees.
There are several ways you can become a crypto arbitrageur. Here are some of the most popular ways:
This is the most straightforward form of arbitrage. You purchase a cryptocurrency from one exchange and sell them or another.
For instance, you can buy bitcoin on AAX exchange at a lower price and sell it on another exchange for a higher price or vice versa.
It is the most basic way to become a crypto arbitrageur. It doesn’t require complex calculations and comes with less fees since the movement of funds happens just once, and there are fewer trades to complete.
On the other hand, triangular arbitrage is more complex and potentially more rewarding. It involves trading three different currency pairs in a way that takes advantage of price differences.
For example, you can buy ethereum (ETH) with EUR and sell your ETH for USD. After that, you exchange your USD to EUR.
Triangular arbitrage works best with currency pairs with a large volume and is more complicated than simple arbitrage.
Other forms of crypto arbitrage include statistical arbitrage and convergence arbitrage. Despite the risks involved in becoming a crypto arbitrageur, it is a great way to make money with crypto when you fully understand how to trade.