Arbitrage in Crypto markets
Arbitrage in a layman's language is a strategy to take advantage of differences in prices across markets to make profit. In economics and finance, arbitrage is referred as the practice of taking advantage of a price difference between two or more markets.
Arbitrage opportunities come and go in the blink of an eye. Sometimes selling and buying must occur simultaneously.
Arbitrage is an idea which is not unique to cryptocurrency. It also covers securities, currency, or commodities in different markets.
Generally people recognize arbitrage opportunities with:
Pricing: It’s all about pricing. Different prices are listed for different exchanges. For example, when you search for a specific coin that’s cheaper on Exchange A than on Exchange B. You then buy the coin on Exchange A, sell it for a higher price on Exchange B and pocket the price difference.
Arbitrage opportunities exists in the world of cryptocurrency, where a rapid surge in trading volume and inefficiencies between exchanges cause price differences to arise. Bigger exchanges with higher liquidity effectively drive the price of the rest of the market, with smaller exchanges following the prices set by their larger counterparts. However, smaller exchanges don’t immediately follow the prices set on larger exchanges, which is where opportunities for arbitrage arise.
Geography: There’s a term called “The Khimchi Premium” which refers to the inflated rates of cryptocurrency when one tries to buy inside of Korea. The truth is that the cryptocurrency prices varies from country to country depending on the supply and demand. From a point of view, this is a harder arbitrage to pull off as each country’s financial government will have unique laws. Premium Pricing also exists in countries outside Korea, including places like India. Geographical Arbitrage can be platform to take advantage of if one can figure out how to comply with the local regulations of a country.
Listing Arbitrage: The recent surge in the popularity of cryptocurrency has led to a dramatic increase in trading volumes on many exchanges around the world. When a coin gets listed on an exchange, they tend to have an opportunity for lucrative price arbitrage due to the demand for users on the new exchange.
The most basic approach to cryptocurrency arbitrage is to do everything manually. From monitoring the markets for rate difference to placing trades accordingly and transfer funds too. Although there are several cryptocurrency arbitrage bots available online, designed to make it as easy as possible to track price movements and differences, there are other online and mobile trading apps too, which can simplify the market monitoring process.
Benefits of Arbitrage includes:
> Fast way to (potentially) turn a profit
> Huge range of exchanges
> Crypto markets are in their infancy
> Cryptocurrencies are volatile
Risk of Cryptocurrency Arbitrage:
> KYC regulations
> Storing coins on exchanges
> Exchange fees
> Large trades often required
> Withdrawal limits
> Failing to execute in time
> Slow transactions
> Competition risk
Keeping all the risks in mind, Cryptassist will come up with “Cryptassist Arbitrage Opportunities Alerts”.The Cryptassist platform will include a feature where users can connect their portfolios, choose their coins of interest and be alerted when arbitrage opportunities present themselves in the market.
One feature that sets Cryptassist’s Arbitrage Alerts System apart from the rest, is that users can set personal trade volumes that they wish to trade with and the algorithm behind the Cryptassist arbitrage alerts system takes into account the depth of the markets and the needs of the user to create alerts completely customizable to each individual’s trading parameters. This ensures that users only get the relevant alerts and is armed with the information to potentially increase their profits.
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