By Noyon 
Crypto Arbitrage: A Friend’s Insights on Making Easy Money Between Exchanges
Crypto arbitrage trading may seem complicated but it’s actually a simple way to earn passive income.
Here’s my complete guide to getting started and how I earned over $10,000 last month doing it.
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What is Crypto Arbitrage Trading?
Crypto arbitrage trading works by purchasing cryptocurrencies on one exchange where prices are lower and then selling them on another exchange where prices are higher. Your profit comes from the difference between the buying and selling price.
For instance, if Bitcoin is priced at $20,000 on Exchange A but is valued at $20,500 on Exchange B, I can purchase Bitcoin on Exchange A and sell it on Exchange B to earn a $500 profit.
These price differences across exchanges happen because of market inefficiencies. Prices are determined by the latest buying and selling activity on each exchange. Increased demand on one exchange raises the price, while selling pressure causes it to drop. These fluctuations create opportunities for arbitrage trading.
Why Crypto Arbitrage Works
Crypto arbitrage opportunities exist because of the large number of exchanges and fragmentation in the market. No single exchange dominates the market.
Hundreds of exchanges cater to different geographical regions, user bases, and coins. This creates scenarios where the prices are out of sync across platforms.
While this price divergence closes quickly, there’s a window to capitalize on temporary inefficiencies. I can execute buy and sell orders across exchanges faster than the prices normalize.
Step-By-Step Guide To Get Started
Here are the steps I followed to get started with crypto arbitrage:
1. Open accounts on multiple exchanges
I signed up for accounts on major exchanges like Coinbase, Binance, and Crypto.com. I also opened accounts on smaller exchanges like KuCoin, Gate.io, and Kraken.
Having accounts on both big and small exchanges gives me access to more opportunities. The major platforms tend to have higher liquidity while the smaller ones sometimes have bigger price discrepancies.
2. Fund the accounts
I deposited some funds as USDT (Tether stablecoin) on each exchange. USDT allows me to easily transfer funds across platforms without volatility concerns.
I started with $1,000 in capital on each exchange for arbitrage trading. As I gained experience, I increased my trading capital to over $10,000 to scale up profits.
3. Identify price divergence
I use sites like CoinMarketCap and CoinGecko to analyze price differences across exchanges. I look for coins trading at least 1–2% higher on one exchange compared to others.
I also track newly listed coins, which often spike on major exchanges first before trickling down to smaller ones. These temporary distortions offer great arbitrage opportunities.
4. Execute trades
Once I’ve identified a price divergence, I buy the coin on the lower-priced exchange and sell it immediately on the higher-priced exchange.
I use limit orders to ensure I get the desired entry and exit price. I complete the round-trip trade within minutes before the prices converge again.
5. Withdraw profits
After closing the trades, I withdraw my profits as USDT back to my main exchange account. I repeat this process several times a day to compound gains.
Factors To Consider
Here are some key factors I consider when executing arbitrage trades:
- Exchange fees — I account for trading and withdrawal fees charged by exchanges to calculate my net profit. Higher fees eat into the arbitrage spread.
- Volatility — Highly volatile assets have a narrower arbitrage window before prices equalize. I stick to stablecoins and major coins like Bitcoin.
- Liquidity — Illiquid coins are hard to sell quickly on exchanges. I only trade coins with high daily trading volumes and liquidity.
- Speed — Faster order execution improves profitability. I use exchanges with high liquidity and low latency for better results.
Risks and Downsides
While crypto arbitrage seems like free money, there are some risks to consider:
- Opportunities close quickly as prices converge across exchanges. Delayed or failed transfers can eliminate profits.
- Exchanges may freeze withdrawals if they suspect manipulation. I avoid exceedingly high trading volumes to stay under the radar.
- Volatility can lead to losses if prices move against you between executing the buy and sell legs.
- Technical issues on exchanges can prevent taking advantage of mispricing in a timely manner.
My Results from Crypto Arbitrage Trading
Over the last month, I was able to earn over $10,000 in profits from crypto arbitrage trading. Here are my key stats:
- Capital deployed: $50,000 across 5 exchanges
- Number of trades: Over 100 arbitrage trades
- Average profit per trade: $100
- Highest single trade profit: $980
- Exchanges used: Binance, KuCoin, Gate.io, OKX, Huobi
- Top coins traded: BTC, ETH, SOL, UNI, LINK, XTZ, DOT
Tips and Tricks I Learned
Here are some tips from my experience to maximize arbitrage trading profits:
- Act fast once you spot an opportunity. Use limit orders for guaranteed fills.
- Focus on coin listings for the biggest spreads. Newly listed assets often spike sharply across exchanges.
- Avoid USD and USDT trading pairs. Stick to stablecoin pairs like USDC, BUSD, and DAI to avoid volatility.
- Watch out for fake volumes and liquidity. Some obscure exchanges inflate their trading stats.
- Don’t get greedy with trade size. Break up large volumes to avoid moving the market.
- Use arbitrage bots if you don’t have time to monitor markets manually. Bots can help automate the process.
Final Thoughts
Crypto arbitrage is a great way to generate passive income in the cryptocurrency markets. The key is having funds across multiple exchanges and acting fast when opportunities arise.
With the right tools and strategies, arbitrage trading can be highly lucrative. I was able to consistently profit despite having a full-time job. The additional income came in handy for paying off some debt.
Let me know if you have any other questions! I’m happy to help other folks learn about this powerful wealth-building technique within the exciting digital asset markets.
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