Bitcoin arbitrage refers to buy Bitcoins on one exchange at a low price and sell them at a higher price at another exchange. Bitcoin prices are not the same on every exchange, rather they vary. The low trading volumes and the unlinked markets cause these variations.
When a Bitcoin’s price fluctuates, then all the exchanges do not start selling at the same price. It takes time for these exchanges to set their average price. You can take advantage of this time to buy and sell Bitcoins. In this article, we will discuss Bitcoin arbitrage in detail.
How it Works?
Let’s suppose you bought a Bitcoin on an exchange at a price of $600 in Dubai. Another exchange lists Bitcoin’s price as $630. If you sell the Bitcoin at this exchange you can earn $30 as profit. If you had bought 10 coins and sold all of these, then you could have earned $300.
Although this looks like a good business opportunity, there are some restrictions.
- Your each transaction takes some time for verification. During that time, the exchange rate might change and you might lose some cash instead of making a profit.
- For Bitcoin trading that involves large transactions, the verification process at most exchanges is long.
- Depending on what medium you used to pay, it could take up to ten days to deposit fiat currency.
- You should also know that many exchanges have charges.
Should You Arbitrage Bitcoins?
Having extra cash or Bitcoins can come in handy when you are looking to arbitrage Bitcoins. If you know how and when to engage and carefully follow effective strategies, you can start earning profits. A tactical approach could be to analyze the different exchanges and study their charges. You can then make a table to calculate the profit. You should also consider the time taken to process the transactions.
Bitcoin’s price should not be different at each exchange. Arbitrage basically helps to bring the exchanges together to a standard value. As the rate of arbitraging increases due to the growth of Bitcoin’s market, the gap between exchanges narrows down.
Although arbitraging Bitcoins is a little risky, the incentives are worth it. It is a good source of passive income. If you can hire an expert for Bitcoin arbitrage, you can get amazing profits. Alternatively, you can learn techniques from a professional who has been in this field for several years.
Becoming an arbitrage professional will take some time, but hard work is the key to success. You can’t just learn everything in one day. You have to progress gradually. Learning from professionals is a good way to get more knowledge about this technique. Patience, practice and experience are what you need in order to become an expert in Bitcoin trading.