What is Cryptocurrency arbitrage?

¿Que es el arbitraje de criptomonedas?
4 min read
Cryptocurrency arbitrage is an open secret among users of the crypto world, since if everyone knew what cryptocurrency arbitrage is, the business would be less and less profitable.
But since we reward who is informed here, we are going to tell you what crypto arbitrage is about and how you can do to increase your portfolio by resorting to this type of practice.
The concept of financial arbitrage is as old as the wind, but it is not something that common for people who have never entered the world of finance.
For most people, the word “arbitration” cannot be dissociated from a red and yellow card, from the controversial VAR or from a penalty against Real Madrid.
But don’t worry, today I bring the definitive explanation.
Cryptocurrency arbitrage is the process of buying crypto in a certain place at a low price and selling it in another place at a higher price. Generally this practice is carried out through exchanges that usually have different quotes for the same cryptocurrency.
In this way benefits can be obtained (in some cases more, in others less) thanks to the difference in the prices. Eg Buying BTC on Bitnovo at a low price and selling it in the competition for more money.

Operation of Bitcoin Arbitrage or other cryptocurrencies

To understand how arbitrage works in Bitcoin, Ethereum or another crypto, let’s pretend that a user has bought 2 ETH in Bitnovo at a price of 400 euros for each ETH. So, in total, you have spent 800 euros.
Once this user receives the ETH in his wallet, he decides to put them up for sale on another exchange, because he has seen that it offers him 450 euros for each ETH.
So he decides to sell the 2 ETH for a total of 900 euros and makes 100 euros of profit in a matter of minutes.
Simple, fast and in 2 transactions.
If we make an estimated calculation, assuming that the user has taken 30 minutes to carry out the operation, he has obtained a profit of 3.3 euros per minute.
It’s not what Le Bron James earns per minute, but it’s not bad for you that you don’t play basketball in the NBA.
Also, imagine that you make this transaction but instead of 2 ETH you buy 20.
You would earn 33.3 euros per minute with only 2 operations and without a doubt you would feel like an Arab sheikh in Dubai.
It is worth clarifying that there are also various tools, such as cryptocurrency trading bots that allow you to automate these and other tasks so that you do not have to spend all day in front of the screen trying to find differences between prices.
¿Que es el arbitraje de criptomonedas?
Among the most recommended tools to help crypto arbitrage are:
Blackbird
This is a trading bot that specializes in Bitcoin arbitrage. One of its best features is that it supports various exchanges such as OkCoin, Bitfinex, Bitstamp or Gemini.
Hummingbot
One of the best bots as it analyzes order book data in real time and performs operations in a matter of milliseconds. Users can use plugins to create or customize their strategies and it has support for both centralized and decentralized exchanges.
CoinArbitrageBot
There is also the possibility to arbitrate cryptos manually and in that case we recommend CoinArbitrageBot. This tool analyzes the main crypto exchanges in real time and finds opportunities according to the minimum percentage you have chosen.

Is arbitration legal?

If on some occasions it can be so profitable, it is normal that you wonder if arbitration is legal. The reality is that, if you meet all the requirements to operate in the different exchanges where you participate, it is totally legal for you to operate by arbitrating cryptocurrencies.

Arbitrage is nothing more than the buying and selling of cryptocurrencies and that is fully permitted by law.

This has been a quick review of what is cryptocurrency arbitrage and I will soon complement this article with more resources that will help you arbitrate much more efficiently. Until next time!.