Initially, humanity was available a very limited range of opportunities to earn a living: gathering, hunting, primitive agriculture. But as society developed, new tools became available. One of them is cryptocurrency arbitrage. At first glance, it may seem like an ordinary kind of speculation. But what can you learn if you study it in more detail?
general information
When cryptographic money appeared, exchanges began to develop, offering their services for their purchase, sale and exchange. Moreover, these operations can be carried out both between virtual currencies (for example, bitcoin to lightcoin), and ordinary traditional ones, such as rubles, hryvnias, dollars, euros. On these exchanges, the exchange rate is more or less similar, but, nevertheless, differences can reach several percent.
Making money on cryptocurrency arbitrage involves buying at a low rate and selling at a higher rate. Profit is the size of the difference. It, by the way, is called arbitration. To earn in this way, you do not need to have special knowledge or skills. It is enough just to constantly monitor the value of exchange rates at major exchanges.
What should I look for?
Here is a short list:
- Actually, the course itself.
- The size of the commission for depositing or withdrawing fiat. Here you should step back and make a little explanation. Cryptocurrencies are usually entered without commission. When withdrawing, a small fee is charged. Therefore, in order to avoid negative consequences, you should monitor the fiat.
- Know the list of codes of exchange points. We’ll talk about this later.
Where to deploy activities?
At what sites can you learn cryptocurrency inter-exchange arbitrage? It should be noted that there is a fairly wide potential field of work. But within the framework of the article only the most popular will be given:
- BTC-E. This is perhaps the most popular Russian-language exchange. Its feature is, as a rule, a lower rate than on other trading floors.
- EXMO. The exchange, where trade is carried out in large volumes, there is a significant difference between the selling and buying rates, orders are quickly executed. It is pretty good for beginners to earn seed capital.
- YoBit. A wide range of cryptocurrencies, there are bonus giveaways. It is considered the leader in the process of adding new positions.
- Livecoin Quite an extensive Russian-speaking exchange.
- Btc-trade. Ukrainian project, works with hryvnias. It has good courses, working with it is much more profitable than through exchangers.
On these exchanges, you can monitor cryptocurrency rates in real time and, when a favorable option appears, buy / sell them.
How to earn?
The most optimal way is to transfer funds between exchanges using special codes. The positive point is that no fee is charged for their use, and operations are carried out instantly.
The advantage of codes is that they can work both with cryptocurrencies and with traditional money. It should also be understood that they are disposable. Therefore, having activated the code, a person will say goodbye to the amount in one of his accounts. It should be noted that earnings in exchangers can have their pitfalls, for example, working not in an automatic but in a manual mode. Therefore, such a service for arbitration of cryptocurrencies is undesirable to use.
Example
Let's look at a situation that could potentially occur. Let's say that on EXMO, bitcoin costs 400 thousand rubles. And at BTC-E they trade him for 396,000. What is the procedure? Initially, you need to deposit funds on BTC-E and buy one bitcoin like that. After that, he using the code is transferred to EXMO. At the same time, a commission of 0.001 MTC for transfer is charged, as well as 0.2% for purchase and sale. All that remains after the sale is profit. In our case, it will be something about two thousand rubles. And then the fun begins - the cryptocurrency arbitrage itself.
Initially, you need to find the best way to get your money back on BTC-E. After that, the process is repeated. It should be noted that there may not be any profitable offers at a certain point in time. Therefore, it is necessary to track cryptocurrency rates in real time in order to make money at a good time.
To fill your free time, you can trade currency directly on the exchange itself. This is a classic arbitration scheme. It is convenient due to its long-term use and is the most popular principle of interaction.
A little more about the classic scheme
If there is no desire to start trading without investing your funds, then the initial capital can be obtained on the sites that distribute it for free. To do this, it is enough to register, work a little, and it will be available in a couple of days. Profits are directly generated due to the inefficiency of the system for the implementation and aggregation of price quotes. We can confidently say that in the classical scheme there are minimal risks. But they are still there, you should not forget about this.
We should also mention the minimum requirements in order to successfully start here (of course, you can lower the bar, but then the effect will be minimal). So this is:
- The amount of funds for arbitration is more than six thousand rubles.
- Commissions for transactions, as well as transfers between exchanges, cost less than profit.
- Work in a period of inactive bidding to earn until a significant change in price.
- It is desirable that the traded pair differ by more than two percent. The above example, where it was only 1%, should not be considered as a practical guide to action.
Static Arbitrage Earnings
This method requires analyzing the current state of the market, where the participant acquires the most promising asset in terms of growth. There is a risk of making the wrong choice, which will lead to financial losses. In general, this approach has much in common with trading strategies, which are based on the calculation of possible profits. The main task in this process is to determine patterns and use them for your own good. How is such cryptocurrency arbitrage implemented in practice?
First you need to select several dependent instruments, having formed your trading portfolio. Then you should determine where there is underestimation, and where is revaluation. And we buy what is beneficial to us. The effectiveness of this approach is relatively lower than when working according to the classical scheme. But the strategy is more flexible. Often the solution in this case comes down to the formation of a neutral portfolio, the price chart of which moves without strong jumps. Let's look at a small example.
Suppose a bet was made on the statistical arbitration of a pair - lightcoin and bitcoin. There is a high correlation between them. In this case, there is a pattern - one currency goes up, the other down. Then they change places. Our task is to buy a catch-up currency and sell a leading one. At the moment of their contact, we close the deal. If there is an assumption that currency parity will be established, then this can be realized without significant risk. But, alas, there is a minus here - the dependence is unstable and will not always act.
Using Automation Tools
All of the above suggests that actions are performed by a person. But surely it will be so? No, a special program for arbitration on the cryptocurrency exchange can come to the rescue.
Moreover, automation is carried out in a fairly wide range. This may be a bot for cryptocurrency arbitrage engaged in trading, and a program that will only report changes and / or reaching a certain level of quotes, and all decisions will be made by the person. The first option sounds most attractive. But if automation was able to trade perfectly, then it would quietly crowd out all the people-brokers and traders. Chances are good to lose. Therefore, the most suitable option is a program with information functions. And you have to rely on your mind.