cryptocurrency indexes
July, 2018

Crypto market and Arbitrage

Simply, “Arbitrage in crypto market” is difference in prices of a crypto currency on different exchanges. For example, lets compare this with good reselling, lets take for instance apple magic mouse 2. Now we see a seller on alibaba.com selling at a price of $50, while on amazon one is selling it at $53.5, what might a trader do is buy these mouse from alibaba.com and sell them on amazon, taking advantage of the price difference. Now, there is a transfer fee on transferring tokens from one exchange to another, lets view this as the delivery charges that the seller from alibaba.com will charge per transaction, say $5. Then this trading becomes more of a loss deal than what we what we were looking for. Well to over come, or reduce the effective profit, we can simply increase the number of articles that we are ordering from alibaba.com. If we buy only 1 mouse, we resell it on a loss of $1.5, while if we order 2 of these, then the effective price becomes $52.5 and we get a profit of $1. This is what we originally intended to have. To further decrease the effective price, we can simply increase the number of articles.

cryptomarket arbitrage

Even though the arbitrage concept is not a original to crypto market, the emergence of multiple exchanges, in a short (very, very short) period of time led to the high chaotic environment all over the crypto market and real price gaps amongst them.


Cryptocurrency Arbitrage: Lookouts

  • Firstly, Volatility of crypto market is the biggest risk if all other factors have been looked into. The price of the crypto may change whilst transfer time and thus the whole process might just go to vein or might even result in losses
  • Secondly, the transfer fee and taxes might bring down the profit margin for any such arbitrage opportunity. Sometimes the price difference is much lower than the transfer fee.
  • Third, Volume on an exchange of the currency that you are trading on is the most important factor for an arbitrage opportunity to be successful, The trading volumes from an exchange might be so low that you are unable to buy or sell the targeted currency


Case Study(EOS-BTC)

The EOS-BTC case can easily be considered as follows:

Now we can easily look at the difference in prices on binance and Cryptopia to have a difference of 34.56%.

cryptoz arbitrage

With price chart of EOS-BTC on binance as:

btc eos

And price chart of EOS-BTC on cryptopia as:

crypto price index

We need to make out from the price charts the arbitrage opportunities, which might be as a result of multiple factors such as potential listing of a cryto on an exchange. This might become time consuming and laborious. Comes into picture platforms such as Cryptoz.ai, which have all the arbitrage opportunity listings for you. All ready and easy to use., where you can easily target the cryptocurrency and/or market to view all arbitrage opportunities.


Conclusion

So the arbitrage opportunities are proved to be used to get decent profits, though with high risks due volatility of cryptocurrency which you are trying to trade might even take the whole concept down for you, thus you must be aware of what you are doing, initially explore from Cryptoz.ai and then confirm from the exchanges you want to trade.


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