Bitcoin and cryptocurrency arbitrage has changed a lot over the years. As more trading bots and institutions try their hand at arbitrage, so does the strategy to try and capitalize on profitable arbitrage opportunities. The big question everyone has is “are there still profits to be made?” and I’m here to tell you that the answer is a resounding yes, but you’ll need to work for it and use the right tools.
By the way, if you’re curious about how crypto arbitrage works you can learn more here: How exactly does crypto arbitrage trading work?
How Much Profit Can Be Made From Bitcoin & Crypto Arbitrage in 2020
As I’m writing this I’ve just seen a 0.36% spread (price difference) on the BTC-EUR trade pair if you were to buy on Kraken and sell on Binance, with an estimated profit of $15. Yesterday I saw a spread of 0.4% with an estimated profit of $27 on the BAT-BTC trade pair.
These are the types of spreads you can expect to find in 2020: price differences of between 0.2% and 2.5%, with estimated possible profit of between $10 and $50. Taking advantage of 10 spreads a day at an average of $15 profit would yield $150/day, or $1,050 a week.Of course sometimes a larger spread might pop up, but these are what you’ll be able to find fairly regularly.
If you’re persistent and can be quick to act on profitable opportunities, there is absolutely money to be made here. The examples I’ve given are only for spatial arbitrage (across exchanges), triangular arbitrage and other crypto arbitrage strategies offer their own advantages and profits as well. If you’re day trading crypto and the markets aren’t moving much, arbitrage can be a great tool in a crypto trader’s arsenal to turn a profit even when prices are stagnant.
Is Crypto Arbitrage Easy?
Cryptocurrency & Bitcoin arbitrage is all about speed. Spreads might only exist for a few seconds or less, so you need to be able to compare prices in real-time across exchanges. When an opportunity arises, you need to be able to configure and submit trades as quickly as possible.
For this reason, it’s near impossible to profit from crypto arbitrage in 2020 unless you’re using a tool to assist you. The same can be said about crypto day trading in general: you’ll always want the right tools to help with the job, whether they be charts or arbitrage scanners or anything else. All of the other traders are using them, so you’re at a disadvantage if you’re not.
Isn’t Transferring Between Exchanges Too Slow?
When most people first think of arbitrage they think of buying on one exchange, transferring to another exchange, then selling there. That takes too long and doesn’t guarantee a profit, so it’s really not feasible. By the time the transfer completes the price difference may no longer exist. So the type of arbitrage we’re looking at here is where you’re holding crypto on two exchanges at once and submitting accompanying orders in parallel
For example, on the BTC-USD market you’re holding USD on Coinbase Pro and BTC on Kraken. When the price is lower on Coinbase Pro than on Kraken, you submit a buy order on Coinbase Pro to buy BTC with your USD balance, and at the same time you submit a sell order on Kraken to sell some of your BTC balance for USD. Due to the price difference, a.k.a. “spread”, you will have made a profit.
Another arbitrage strategy that doesn’t involve waiting on long transfer times is triangular arbitrage, which allows you to instantly fill a number of orders, all of which are on the same exchange, and realize a profit (if you’re fast enough).
This works by exploiting price differences between different trade pairs. For example, you could trade BTC for LTC, LTC for ETH, and ETH for BTC. In the end you’re back to your initial BTC balance, but you’ve realized a small gain due to price differences between the exchange rates. Since this all happens on one exchange, you’re not susceptible to waiting on transfer times. Continue Reading