How cryptocurrency arbitrage can earn you a lot.

How cryptocurrency arbitrage can earn you a lot.

By Dzoelx | Scripts | 21 Apr 2020


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Price fluctuations is not only a function of time, it’s is also a function of market. Even in our everyday markets, the price of a commodity doesn’t stay same in different markets, the cryptocurrency markets aren’t different as regards this.

Fluctuations in price of cryptocurrencies from time to time and market to market form the crux of cryptocurrency trading. While the time fluctuations seems more popular and drive more interest, market fluctuations seems to be ignored.


Arbitrage Is the practice of quickly buying and selling foreign currencies in different markets in order to make a profit. A common practice in the commodity market, right? Of course! Business men buy commodities from markets with cheap prices and sell them off in markets of higher prices thus making as much gain as the percentage difference in the price of these commodities in the different markets.


 Causes of price variation across markets.


Price variation in different cryptocurrency exchange /markets is also a function of time. This variation resolves in a short while and price becomes uniform. This difference in price is mainly due to variation in demand in different markets at a given time.

Some markets are as a matter of fact more informed than the other, hence price movements are faster on such exchange.
Whale influence also drives price, more buy force from whales in market drives price up slims down the sell order while increasing the buy orders. When this happens in at different speeds and at different times in different markets, price variation occurs. This is normal and price variation can be up to 50%.


 How you can make a lot from cryptocurrency arbitrage.


Arbitrage in cryptocurrency can be more lucrative than you think, arbitrage traders are in constant search of this variation and moves with the change. A 10% price variation creates an arbitrage trader’s paradise. Quantity wins again, making returns from an arbitrage depends on the degree of price variation and also the quantity of purchase.

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Gross arbitrage return is a product of the difference in price and the quantity of the coin purchased. If the difference in price is low, buying more coins compensates for this and gives a good return at successful sale at the lower price. Capitalizing on a huge gap in price and purchasing tangible amounts of coins amidst huge price gap gives a high return on sale.


Net arbitrage return is obtained by deducting the exchange withdrawal charges from the gross return. Increasing purchase to compensate for trading and withdrawal charges could also be a good practice. Capitalizing on price variation is profitable practice, however, the sale in buy orders in both markets should be considered as a thin buy orders on target market could lead to substantial losses


Disclaimer: Information above is a product of analysis from current data, it is in no way a financial advice, endeavor to do your own research.

 

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Dzoelx
Dzoelx

Drinking coffee and writing about cryptocurrency. Follow me on medium: https://cryptoscripts.medium.com/


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