Can You Really Make Money from Crypto Arbitrage Trading?
When I first joined Medium in March 2022, I did not know that I would be bombarded with hundreds of articles on “How To Get 100 Followers” EVERY DAY! I understand that this is a requirement in order to be granted access to the Medium Partner Program to earn money; however, the money that I could earn from being a devoted writer would take time to build, and let’s be honest getting 100 followers is harder to obtain unless you are willing to use the “follow-for-follow” approach or by writing articles on how to get followers.
To be quite frank, I did NOT join Medium for that reason!
I wanted to build my credibility and following by offering members in the Medium community something of value. Therefore, I began my search for more ways to make money online while building my Medium profile and I found myself on the side of Medium where you can learn almost any side hustle in the world! I was truly amazed and blown away; however, I still did not want to repeat what others were already offering so I continued my search, and BOOM…that’s when I stumbled across Crypto Arbitrage Trading!
How I Felt Finding Crypto Arbitrage Trading!
At first, what they were offering sounded too good to be true! Do you mean to tell me there are cryptocurrency arbitrage platforms that allow you to earn 0.1% up to 1.0% money per day based on your account’s size if you know how to trade? I started doing as much research as possible to see if they were legit or some brand new crypto scam; however, the more I researched, the more information I found that gave me the confidence to invest a large sum of capital to give one exchange a shot to make some profit.
Before I share with you all the steps, let’s define a few terms shall we?
What is Arbitrage Trading?
Arbitrage trading is the simultaneous buying and selling of assets in order to profit from a discrepancy in the price. It is a type of trading that exploits the price differences between two or more markets. For example, if a stock is selling for $10 in one market and $11 in another, an arbitrageur would buy the stock in the first market and sell it in the second market, earning a profit of $1 per share.
Arbitrageurs typically trade on margin, meaning they only have to put up a small amount of money to control a large amount of stock. This allows them to earn a large return on their investment while taking on a little risk. Arbitrage trading is a perfectly legal way to make money, and it can be extremely profitable for those who know what they are doing.
What is Crypto Arbitrage Trading?
It should be noted that arbitrage trading has been around before the emergence of crypto markets; however, crypto is known for having highly volatile markets compared to traditional financial markets. Cryptocurrency arbitrage trading takes advantage of the fact that cryptocurrencies are traded on multiple exchanges, each with its own price. By buying a cryptocurrency on one exchange and selling it on another, traders can earn profits with more markets available for them to watch.
However, due to its volatility, cryptocurrency prices can move quickly in the markets, and arbitrage trading requires careful planning and execution. This is why you may read that the risk increases with crypto arbitrage trading; however, this is only if the crypto arbitrage trading platform uses a cryptocurrency other than what is known as a “stablecoin.” If stablecoins are used in the process, the risk remains low for crypto arbitrage trading.
What are Stable Coins?
Stablecoins are digital assets that are pegged to another stable asset, such as gold or the US dollar. The value of a stablecoin is designed to remain consistent, even if the market is volatile. This makes them an attractive option for investors who want to protect their assets from market fluctuations. There are several different types of stablecoins, each with its own benefits and risks.
One popular type is called a centralized stablecoin. These are often backed by a reserve of assets, such as cash or gold, and are managed by a central authority. This gives them greater stability than other types of stablecoins, but it also means that they are subject to the same political and economic risk as traditional fiat currencies.
Another type of stablecoin is called a decentralized stablecoin. These are not backed by any central authority, but instead, rely on algorithms to maintain their value. This makes them more resistant to market fluctuations, but it also means that they are less liquid and more difficult to trade. Ultimately, the best type of stable coin for you will depend on your investment goals and risk tolerance.
Tether (USDT) Stablecoin
Why Choose Crypto Arbitrage Over Normal Arbitrage Trading?
As mentioned before, the use of stablecoins keeps the risk the same as normal arbitrage trading; however, since cryptocurrency markets operate 24 hours a day, 7 days a week, arbitrage traders can take advantage of multiple trading opportunities due to price discrepancies that are always present in the crypto network from one exchange to another exchange.
Traditional financial markets are typically open Monday through Friday for 8 hours per day. They are regulated more to limit the number of price discrepancies and this means there may be fewer opportunities for investors in traditional markets to make a substantial profit without a large sum of capital upfront. With Crypto arbitrage opportunities, a person could make considerable gains with any amount of money on the right crypto arbitrage platform.
Pros and Cons of Crypto Arbitrage
Upon doing my research, there are a number of risks associated with crypto arbitrage trading, and it is important to be aware of these before considering this as an investment strategy.
Cons of Crypto Arbitrage Trading
- The price difference between the markets may be too small to make a profit or the price discrepancies may change before the trade can be executed.
- Arbitration relies on accurate information about prices and liquidity conditions on different exchanges. If the information is inaccurate, the arbitrageur could lose money.
- It requires a considerable amount of capital/assets, as well as access to multiple exchanges. As a result, it is not suitable for all traders/investors.
Pros of Crypto Arbitrage Trading
- Some platforms reward 0.1% profit for each transaction while others offer a too good to be true amount of 0.3% profit per transaction based on the liquidity provided to fulfill the transactions required.
- There are OTC exchange platforms that use AI intelligent algorithms to match users with the best orders to provide accurate transactions for crypto assets.
- There are platforms that allow users the opportunities to use high-frequency trading services to place orders to ensure consistent daily gains for any portfolio size.
Is Arbitrage Trading Legal in Crypto?
Now at this point, despite the information I have already provided, the natural skeptic may still arise in some of you that are reading, so I wanted to make sure that I answer the daunting question in the back of your mind…is this legal?
A quick Google search will provide you with an adequate response; however, there are bloggers out there that still choose to write articles claiming that Crypto arbitrage trading is a scam. There are many scams out there and you have to do your own due diligence when it comes to finding a legit platform. I also will not share the name of the platform I use because it is not my job to convince you what to believe or even what platform to use since I am not a financial advisor.
It should be stated that cryptocurrency arbitrage is not only legal worldwide, but it is also necessary! Why? Because it improves market effectiveness. On Kraken’s site they state the following:
“Once a crypto arbitrage trader has completed their trade, they will inevitably bring additional traders to the market who are hoping to exploit the same price difference, which will eventually lead to the asset’s price to become more balanced across markets.”
One thing I was told by a professor in college is that whatever you want to believe, you can find a voice to tell you what you want to hear. Some writers like to make their money off of writing articles on highly search topics, while others like myself like to make our money by trying things out before giving an uneducated opinion. This does not mean that I am more qualified to speak on this subject, but I have found a method that works for me and I am pleased with the results thus far.
How I Make $300+ Per Day Using Crypto Arbitrage Trading
After doing a ton of research, I decided to begin trading on March 31st by depositing $2,000 into a crypto trading platform and after the fees were processed, I was left with $1943.89. Please note that the minimum deposit is only $10, so if you wanted to you could start with $10 but I do not encourage that because the spread and margin in crypto will eat your first trade-up.
Now as a Macbook user, I did not want to use a virtual private server (VPS) to run the trading platform since it works the best on Microsoft operating system, I decided to purchase a mini-desktop that I could operate 24/7 and cut down on the monthly charges of a VPS.
I created a Google sheet that I used to track my daily earnings and by April 6th I realized that once I got everything working, I targeted making 3% per day by risking 1% per trading position. Once I was able to see consistency in my trading, I decided to deposit a total of $10,000+ after all the fees were accounted for in the prices of purchasing the necessary crypto asset: USDT (Tether TRC20), which is a stablecoin.
As you all can see in the image below, every day after April 6th, I earned over $300/day by simply looking for 1:3 risk to reward setups factoring in slippage and commissions within the market that I learned from a trading course I found online.
I am now at the point of earning $300+ per day through crypto arbitrage trading by looking for particular patterns that repeat almost daily on smaller timeframes considering a higher timeframe directional bias. Some days I earn way more because the market moves so fast before I can close my trading position, but I have nothing to complain about on those days. This requires me to spend 1 to 5 hours per day looking for opportunities in the market to trade. It should be noted that this skill set is not something that only works in cryptocurrency markets.
The risk in arbitrage trading is that you have to supply the liquidity to make transactions happen. If you know what to look for, the trade setups rely on how accurate you are at following the steps necessary to repeat every day. If you want to remove the risk of supplying this much money into a trading account, you can work towards getting funded by a prop firm. The one I recommend is called FTMO. They have a long history and good standing of paying out profits earned through trading.
NOTE: FTMO provides all retail traders the opportunity to access the trading Evaluation Process to become qualified to manage their FTMO Account, which is linked to their Proprietary Trading Firm. By partnering with multiple institutional liquidity providers, FTMO is able to offer excellent trading conditions and spreads that simulate real market conditions at a very low cost. With truly raw spreads and extremely low commissions, you’ll be getting some of the best trading conditions in the market. Take their challenge now if you are looking for access to more capital.
Once I get to a certain amount, I decide to withdraw profits to a Ledger wallet to keep my money secure instead of putting it in a bank that does not allow me to earn more interest than utilizing a platform like Nexo.
My goal with this article is not to answer every question or promote any particular trading platform. My goal is to impress upon you as a reader that there are ways to make money if you dedicate the time to learn how to trade. You just have to be willing to look for the opportunities that exist.
How Long Will Arbitrage Trading Last?
Many people like to ask me to read into the future and tell them how long I believe this crypto arbitrage trading is going to be around and I cannot say that because if I could, I would have been doing this since 2009 when Bitcoin emerged on the scene; however, I do know that crypto arbitrage trading is nothing new. Arbitrage traders will always be needed to balance the market and crypto arbitrage trading was around before me and it will be around long after unless the crypto market crashes.
I would like to state that I will not promote any platforms stating that they provide this as a service because many are scams. There are some platforms that offer the ability to take advantage of the differences in digital assets in order to make a profit off of them, but you should do your own due diligence before investing money into a platform you do not control. I prefer to look for the discrepancies in price myself and trade them.
How Much Can You Earn a Day with Crypto Arbitrage Trading?
Some websites claim to make your earnings passive through a platform that offers online trading and arbitrage trading. The daily returns for investments can range from 0.1% to 1.0%. Anything above this amount should raise a red flag that it might be a Ponzi scheme. I personally do not advocate for the passive form of arbitrage trading and I stick to learning how to trade manually.
If you learn how to trade, you can make whatever you want per day. I wanted to focus on 1:3 risk-to-reward setups and I learned how to find them in this course: Trading Made Simple
The Digital Journal states the following:
“Crypto OTC exchanges provide intelligent high-frequency transaction services to users all over the world. No matter whether the market is a bull market or bear market, whether there are large market fluctuations or a stable market, as long as there is a matching transaction, there must be a price difference, so that the small interest difference between purchase and sale orders in milliseconds will be collected and processed by the high-frequency technology, ensuring the stable revenue for customers by its fast processing all day long.”
This is NOT financial advice and I am not a financial advisor. The information is based upon my personal research and experience. Under no circumstances should this be considered as any type of solicitation, investment, or financial advice. Past performance is not indicative of future results. You need to evaluate the risks inherent to participating on your own behalf.
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