Did you ever make money in the crypto world? Are you familiar with arbitrage strategies? There is a big difference between profit and making money, both are completely different. You can make a profit but just making a deposit into the bank and earning a 2% interest. While making money is similar to buying a lottery ticket, winning 50 million, and now you are rich overnight.
Cross-market arbitrage
It was the most successful strategy when Bitcoin was under $2000. At that time, several exchanges were offered different prices. For example, one exchange in Korea sells Bitcoin for $1500 and the other buys that coin for $1900. Wouldn’t it be possible to double the profit if you bought Bitcoin from Korea and sold it in the USA?
The real problem with this strategy is time delays. If an exchange accepts your order and tells you they will transfer the coin in the next two days. So, the volatility of the coin may destroy your profit completely.
Another problem with this strategy, it is not compilable with low market cap cryptocurrency. The reason is that when the coin liquidity is too small, you can not differentiate between multiple exchange offerings. Every exchange has put some limitations on transactions.
Finally, if you are interested in cross-market arbitrage you have learned the time differences, transaction delays, and the market cap of the cryptocurrency.
Pros: This strategy is straightforward and can be executed quickly. The potential for profit exists as long as traders act fast before prices converge.
Cons: Transaction fees and withdrawal limits can eat into profits. Additionally, price discrepancies may vanish within seconds due to high market efficiency.
Spot-futures arbitrage
It is also a very effective strategy because some coins have a price difference between futures and spot. For example, Coinbase future price of Bitcoin is lower than Binance future price of Bitcoin, and what you’re only to do is find when the future price will expire. I think you can buy future contracts where the price is high and sell where the future price is low.
According to some traders, this arbitrage strategy yields 20% in two months if you have selected the better coin, you can accommodate a large amount of profit.
Pros: This method provides a hedge against market volatility, since traders can secure profits regardless of market movements.
Cons: Futures contracts have expiration dates; if the market moves unfavorably before expiration, profits may be reduced or losses incurred.
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