Arbitrage

Crypto arbitrage trading is a type of trading strategy where investors capitalize on slight price discrepancies of a digital asset across multiple markets or exchanges. In its simplest form, crypto arbitrage trading is the process of buying a digital asset on one exchange and selling it (just about) simultaneously on another where the price is higher. Doing so means making profits through a process that involves little or no risks.

The other great thing about this strategy is you don’t have to be a professional investor with an expensive set-up in order to begin arbitrage trading. Arbitrage has been a mainstay of traditional financial markets long before the emergence of the crypto market. And yet, there seems to be more hype surrounding the potential of arbitrage opportunities in the crypto scene. This is most likely because the crypto market is renowned for being highly volatile compared to other financial markets.

This means crypto asset prices tend to deviate significantly over a certain time period. Because crypto assets are traded globally across hundreds of exchanges 24/7, there are far more opportunities for arbitrage traders to find profitable price discrepancies. All a trader would need to do is spot a difference in the pricing of a digital asset across two oArbitrage has been a mainstay of traditional financial markets long before the emergence of the crypto market. And yet, there seems to be more hype surrounding the potential of arbitrage opportunities in the crypto scene.

Types of crypto arbitrage strategies

There are several ways crypto arbitrageurs can profit off of market inefficiencies. Some of them are: Cross-exchange arbitrage: This is the basic form of arbitrage trading where a trader tries to generate profit by buying crypto on one exchange and selling it on another exchange. Spatial arbitrage: This is another form of cross-exchange arbitrage trading. The only difference is that the exchanges are located in different regions.

For example, you could capitalize on the difference in the demand and supply of bitcoin in America and South Korea using the spatial arbitrage method.Triangular arbitrage: This is the process of moving funds between three or more digital assets on a single exchange to capitalize on the price discrepancy of one or two cryptocurrencies. For example, a trader can create a trading loop that starts with bitcoin and ends with bitcoin.