Cryptoarbitage is incipiently the combination of two different words; cryptocurrency and arbitrage. Cryptocurrency can be described as a type of digital money/asset used to exchange in online businesses and it uses cryptography. While Arbitrage is a commerce (buying and selling) cryptocurrency in different markets which has a price difference of that currency. Simply buy that asset from a market where its value is low and then sell that currency/coins to markets where its price is high. Then the price difference will be your profit.
This process can be explained by an example that you buy a coin whose price is that market is $5 and then sell it in a market where its value is $15. You pay $5 and get $15. $15-$5 = $10. You get $10 in your pocket from this exchange of currency. This type of exchange cryptocurrency is known as cryptoarbitage.
How Does it Work?
The difference in the prices of the same currency in the two markets at the same time is due to the currency volume in the market. Currency volume means the amount of concentration of that currency in the market. If the concentration of that currency is high in one market its value will be low in that market. On the other hand, if the concentration is low, the price of that currency will be high in that market. So arbitrage leads to the stream of money from large volume to small volume.
How to do Cryptoarbitrage:
Everything is basically done manually. You have to check the markets for the price differences of currency on a regular basis. Then you have to place the deal and transfer the currency accordingly. But there are also many apps to help the consumers which help in the monitoring of price difference and movement of money across the markets. One example of such trading mobile apps is Black folio.
There are many strategies in crypto arbitrage which are followed for more profit. The three most commonly used strategies are given below:
It is a simple exchange of currency in two different pricing markets.
This type of tactic involves three types of markets having a price difference. For example, you buy the bitcoin which is the most common type of cryptocurrency, using US dollars and then you sell that bitcoin to a market where the price of bitcoin is high. You sell them and take euros and then exchange the euros for US dollars in the market in the euro is expensive. This is a triangular based exchange of cryptocurrency.
In this type of strategy, you will buy the currency on a market where it is undervalued and then sell it on the market where it is overvalued after some time. Then at the middle point of two separate prices, you will profit from the amount of confluence.
Benefits of Cryptoarbitage:
· The fastest way to increase your money or profit.
· The slow rate of information exchanges between crypto syndicates due to disorganization.
· A wide range of exchanges.
· Fast changes and currency sizes in the bourses.