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Crypto Arbitrage: How to Make Money with Crypto

Cryptocurrencies have changed the way we look at finance 💰. Thanks to crypto, everyone has an opportunity to trade and earn, regardless of their location. It’s an exciting new world, and remember – with Quidax, you’ve got the right partner. 

But, here’s the thing – even when you head into the crypto market, you still need to learn how to actually make money. Crypto offers several opportunities to earn, and one of the most interesting of those is arbitrage trading. 

With arbitrage trading, you have a chance to earn money from the swings in coin prices 📊. But, how does it work, and how can Quidax help you make the best of this opportunity? Let’s find out!

What is Crypto Arbitrage?

If you check out traditional finance, you’ll find the word “arbitrage.” It basically means taking advantage of the differences in the price of an asset across different exchanges. 

So, when it comes to crypto, arbitrage is simple – you trade based on the differences in the price of a coin; or a series of coins. The basics of arbitrage are simple – you buy a coin at a lower price on one exchange, and you sell it at a higher price on the other ✨. At the end of the day, you profit from the price difference. 

Types of Crypto Arbitrage

Crypto arbitrage comes in different forms – and, each of them has its own uniqueness. Here are the major types available:

Arbitrage On Spot Trading

Also known as spot arbitrage, this is the most common form of crypto arbitrage trading there is. Here, you buy a coin on one exchange and sell it on another exchange at the same time. Pocket the difference as you profit 🤑, and you can do this as many times as you want. 

Futures Arbitrage: 

Next, we have futures arbitrage. Here, the goal is mostly to find differences in price between regular coins on crypto exchanges and crypto futures.

This one has a bit of technical details in the mix 🙈. So, if you’re not an expert trader, you might want to keep off. 

Triangular Arbitrage: 

With triangular arbitrage, you trade different coins at the same time and profit off the price differences. 

Remember – coins don’t just trade against currencies like the Naira and the Dollar. You also have trading pairs like BTC/LTC, BTC/ETH, etc. So, if the price of Bitcoin (BTC) is up against that of Ethereum (ETH), you might also find that the price of Litecoin (LTC) is up against Bitcoin. 

With triangular arbitrage, you can trade one coin for the other, then trade the second coin for a different coin. As the prices change, you make your profit. 

How Crypto Arbitrage Works

To understand how crypto arbitrage works, let’s consider a simple example:

  • Imagine BTC currently trades at $34,000 on Quidax and $34,500 on Exchange B 🪙. 
  • As a trader, you can buy one Bitcoin on Quidax, then sell it on Exchange B. 
  • Boom! You get a $500 profit just like that 💥. 

Easy peasy! 

Challenges and Risks of Arbitrage Trading 

While crypto arbitrage can be profitable, it has its fair share of challenges and risks. Some of the potential downsides include: 

The Market Always Swings 😵‍💫

Like we all know, crypto prices are volatile. And,  these price swings can happen in a flash. So, if you really want to profit off arbitrage trading, you need to move very quickly ⚡ or you could lose some of your profit. 

You Have To Pay Fees 😮‍💨

Trading on multiple exchanges can involve several fees – trading fees, withdrawal fees, and conversion fees when switching between different cryptocurrencies 😫. You need to account for those while trading too.

Some Coins Aren’t So Liquid 🙈

Smaller and less-known cryptocurrencies may suffer from low liquidity because not so many people trade them ☹️. This makes it challenging to trade large amounts of crypto for arbitrage. 

Is Your Exchange Good? (Hint: Yes, Quidax Is 😉)

Arbitrage trading is time-dependent, as traders must buy and sell crypto almost immediately. Some exchanges may suffer from technical issues 🛠️, hacks, or downtimes that can disrupt arbitrage opportunities and put your funds at risk.

This is why you need to be on Quidax. We’ll never let you down! 💪

How to Make Money with Crypto Arbitrage

If you’re interested in trying your hand at crypto arbitrage, here are some steps to get started:

Research and Choose an Exchange 👀

Identify and research different cryptocurrency exchanges. Look for those with a wide range of cryptocurrencies, good liquidity, and low fees like Quidax 💜. 

Create an Account 👨‍💻

Register a new account on your exchange. Typically, this should take a few minutes to complete ⏰. For instance, you can sign up on Quidax in less than two minutes. 

Deposit Funds ✅ 

After signing up and completing the Know-Your-Customer (KYC) process, if applicable, deposit funds into your account. 💰 Ensure you add enough funds to execute arbitrage trades for the coin you prefer. 

Execute Trades 📊

When an arbitrage opportunity presents itself, act quickly 🏃🏻. Buy and sell the coin or coins simultaneously to take advantage of the price difference.

Conclusion

Crypto arbitrage offers a viable way to make money with cryptocurrencies, but it comes with risks and challenges. 

If you’re a crypto beginner, you should first equip yourself with enough knowledge about crypto trading using the free crypto course on Quidax. Doing so will prepare you for your arbitrage journey when you sign up on Quidax.  

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