What is Arbitrage on cryptocurrency markets?

Cryptocurrency arbitrage refers to buying cryptocurrencies on the exchange, where the price is lower and then transferring it and selling it on the exchange, where the price is relatively higher, ultimately profiting from the temporary price difference. Cryptocurrencies prices may vary from one exchange to another, because the markets are not directly related and in any way connected. The difference in supply and demand on the exchanges can cause significant fluctuations in prices. Thus creating the potential for considerable profits with very little risk compared to the remaining trading strategies. Often, adjusting prices to the global average may take some time, which creates the possibility of multiple earnings on one cryptocurrency pair.

If all markets were perfectly efficient, there would never be any arbitrage opportunities — but markets seldom remain perfect. It is important to note that even when markets have a discrepancy in pricing between two equal cryptocurrencies, there is not always an arbitrage opportunity because of wallet statuses or transfer cost.

What Does It Mean To Arbitrage A Cryptocurrency? Here is example!

It means to take advantage of price differences across different exchange platforms. Let's make a study case: XypherCoin is being traded on Bittrex and Cryptopia. For it's popularity, the volume and activity on Bittrex is high. However, this doesn't happen on Cryptopia as it is not that popular. Unusual market activity spiked the price on Bittrex by 30%; however, the prices are still normal on Cryptopia due to it's low activity. Any trader can buy 1000 units of XypherCoin at 1$ on Cryptopia, send them to Bittrex and sell them for $1,30 per unit. This short transaction allowed a quick 300$ profit in matter of minutes This happens daily. High volume exchanges respond faster to external market conditions, while the rest don't. Some markets have low liquidity which allow to even higher price differences. ArbiTool duty is to search between thousands of altcoins for the most profitable arbitrage opportunities.

How to start?

The first and most important task is to set up accounts and verify them on all exchanges on which we want to make arbitrage.

It is very important to verify the accounts to such a level that they can freely deposit and withdraw money on them. You should take this step before the arbitrage begins because the account verification on some exchanges can take up to 3 business days.

Exchange: Altilly

Very good new exchange, with very low transfer(withdraw) fees and very interesting transaction fees:
Market Taker Fee: 0.12%
Market Maker Fee: 0.00% + 0.01% Bonus
We recommend this exchange for beginners because of lack of defects and threats

Pros and cons:

+very low transfer fee
+low transaction fee
+fast withdrawals


OPEN ACCOUNT

Exchange: BitBay

Exchange from Poland now operating from Malta. They have been functioning since 2014. They have relatively few cryptocurrencies on offer, but there are very good arbitrage opportunities with them. The commission is variable and depends on turnover, the maximum commission will not exceed 0.43%. Deposit rate - average. Payout speed - average.

Pros and cons:

+Low withdraw fee
-they don't deliver wallet statuses by API

OPEN ACCOUNT

Exchange: Coinexchange

Very good exchange, with very low transfer(withdraw) fees
We recommend this exchange for beginners because of lack of defects and threats

Pros and cons:

+very low withdraw fee
+very fast withdraws
+very good support

OPEN ACCOUNT

Exchange: Binance

The Chinese Exchange, which also moved to Malta. One of the largest exchanges, a large number of cryptocurrencies, no FIAT currency, but USDT is available (USD Tether - imitating the dollar value). You can trade with USDT, BTC, ETH and BNB (a token created by Binance). Very fast graphical interface. An interesting fact is the possibility of including commission collection in BNB, thanks to which the commission is lower by half and amounts to only 0.1%, which gives one of the lowest commissions among exchanges.

Pros and cons:

+big volumes
-withdraw fee is quite expensive

OPEN ACCOUNT

Exchange: Bleutrade

Bleutrade is an alternative cryptocurrency exchange that offers trading on multiple cryptocurrencies, including Bitcoin, Ether, Litecoin, DASH, and many others. The Bluetrade Exchange only charges a 0.25% taker and maker fee for all currencies, although they reserve the right to charge a Fee which can range from 0.2% to 0.5% per trade, as well as fixed fees for withdrawals. Bleutrade does not support fiat currencies.

Pros and cons:

+fast withdraws

OPEN ACCOUNT

Exchange: Cryptopia

Based in Christchurch, New Zealand, Cryptopia is a combined cryptocurrency exchange, trading platform and marketplace. It was founded by Adam Clark and Rob Dawson and is designed to facilitate the purchasing, selling and trading of almost anything, using cryptocurrency.

Pros and cons:

+fast withdrawals
+very low withdraw fee
+a lot of arbitrage opportunities cryptopia<->coinexchange
-poor support(they reply up to 30 days!)

OPEN ACCOUNT

Exchange: KuCoin

Kucoin is one of the many cryptocurrency exchanges available for those in search of a modern and secure platform to trade between cryptocurrencies. While Kucoin itself is relatively young, the founding team has been conducting research related to blockchain technology since 2011 and the exchange platform’s technical architecture was achieved back in 2013. This provided the team with several years to iron out the details and deliver seamless service.

Pros and cons:

+fast withdrawals
-high withdraw fee
-bothersome verification


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Exchange: Livecoin

Livecoin is multi-cryptocurrency trading platform, suitable for both beginners and experienced traders. Livecoin offers services both for regular users and for coin developers. These include ICOs, swaps and others. Users can also play dice on the exchange.

Pros and cons:

+fast withdrawals
+low withdraw fee


OPEN ACCOUNT

Exchange: GateIO

Gate.io is operated by Gate Technology Inc. They are dedicated to security and your experience, offering you not only a secure, simple and fair Bitcoin exchange but also promising to safeguard your asset and trading information.

Pros and cons:

+ Low withdrawal fee with optional withdrawal service
+ Low trading fee.


OPEN ACCOUNT

Exchange: Cobinhood

COBINHOOD is an exchange for trading cryptocurrency. It considers itself to be a next-generation cryptocurrency platform. COBINHOOD also bills itself as the first zero fees cryptocurrency exchange in the world. Popo Chen is the founder and CEO of COBINHOOD. He is a serial entrepreneur. He earned his Master’s Degree in Electrical Engineering by age 22. This platform has more than five million active users. It has earned angel investors a 20x return within a year.

Pros and cons:

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Exchange: Crex24

CREX24 is yet another cryptocurrency exchange targeting Russian-speaking clients. It was set up in 2017 and offers trading in cryptocurrencies for fiat currencies and cryptocurrencies for cryptocurrencies. The available tokens are the following: BTC, LTC, DOGE, DASH, ETH, ZEC, XMR, XEM, GAME, BCN, DGB, BCH, ETC, BTS, XGOX, Monero and BTG. They can be traded for each other. Additionally, Bitcoin can be traded for USD, EUR, JPY, CNY and RUB, Digibyte can be traded for euros and XGOX – for USD. And vice versa. But, trading in cryptocurrencies vs. fiat currencies is not available for clients in the EU and the USA. They can only trade in cryptocurrencies.

Pros and cons:

OPEN ACCOUNT

Exchange: Mercatox

Launched in 2016, Mercatox is a peer-to-peer cryptocurrency exchange that allows you to buy and sell well over 100 cryptocurrencies. A 0.25% fee applies to all trades, and you can access a wide range of currency pairs as well as a multi-currency e-wallet to store your crypto assets. We’ve gathered everything you need to know about the benefits and disadvantages of trading cryptocurrency with Mercatox, so keep reading to find the information you need to decide whether or not this is the right exchange for you.

Pros and cons:

+fast withdrawals
+many arbitrage opportunities

-They faking TRADE HISTORY and transaction volume by adding fake transactions on list. But BUY and Sell orders are 100% real. So transfer there only that amount that you can sell instantly.
-frequent switching off of wallets
-without notice, they can change the address of your wallet, so it's better to check its address before each transaction and do not "get used to one address"

OPEN ACCOUNT

Exchange: CryptoBridge

CryptoBridge is a decentralised cryptocurrency exchange that runs on top of the BitShares platform. This crypto-to-crypto exchange allows users to buy and sell hundreds of popular coins and tokens, plus benefit from the peace of mind of using a decentralised platform that leaves the control of private keys in your hands at all times.

Pros and cons:

+Decentralised exchange
+You control your private keys
+Competitive trading fees
+Offers a huge selection of crypto coins and tokens
+BridgeCoin (BCO) holders can stake their coins to receive their share of 50% of trading profits
+Web and desktop interfaces available
+Capable of processing up to 100,000 transactions per second and has an average confirmation time of just 3 seconds
-Some users have criticised slow response times from customer support
-Can’t deposit fiat currencies
-May be a little intimidating for users who are new to cryptocurrency
-No two-factor authentication
-Low trading volume compared to many centralised exchanges


OPEN ACCOUNT

Exchange: HitBTC

HITBTC registerd in the UK in early 2015. The exchange offers a collection of the most common crypto to crypto trading pairs. The volume has been steadily rising providing decent liquidity and a narrowing bid ask spread. Security is good with its two factor authentication and with an unblemished track record. Trading fees vary depending on whether the order is executed immediately - i.e. removing liquidity or adding liquidity - if a trade is executed immediately then the fee is 0.1% and if placed on the orderbook they receive a rebate.

Pros and cons:

+fast withdrawals
-HitBTC on some coins allow trading only rounded amount of coins this can cause end up with unsold small amount of coins. If in ArbiTool market depth you see rounded amounts on HitBTC it means you should transfer rounded amount of coins(after withdraw fee).
-very high withdraw fees


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Exchange: FreiExchange

FreiExchange is an exchange which only facilitates altcoin trading. They are developed by a group of professionals, who are connected to a longstanding coin. FreiExchange facilitates the trading of Freicoin, a rather old cyptocurrency, which had high goals since inception. The most unique features are the “demurrage fee” and the aim to create a global basic income system. Freicoin dropped in popularity, as the developers moved on to implement important solutions for some of the major coins. That being the case, some of them have returned to the original project. This leaves us optimistic for the future of this exchange.

Pros and cons:

+fast withdrawals
+withdrawal fee based on % so arbitrage is always profitable

-low volumes

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Exchange: Bittrex

Bittrex is one of the larger crypto to crypto exchanges offerign a large number of trading pairs into bitcoin - including all the major cryptos such as darkcoin, nextcoin and litecoin. They also offer NeuCoin and Ethereum. The exchange does have a very high turnover crypto currencies - leading some to accuse it of allowing pump and dump schemes that erode confidence in the crypto currency ecosystem as a whole. Apart from that they do have very good security with two factor authentication and are United States based.

Pros and cons:

+fast withdrawals
-middle cost of withdraw (sometimes 10x more expensive than on cryptopia)

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Exchange: Poloniex

Poloniex is a pure crypto to crypto exchange based in the United States. With a grand redesign in early 2015, the site has added a wealth of features to provide a fully immersive trading experience. Technical analysis charts and live chat mean it is easy to stay abreast of news flow and analyse price trends before taking a position. For a crypto to crypto exchange, there is good security and decent volume and order book depth for the majority of its trading pairs. Trading fees are flat at 0.25% and deposit and withdrawal fees are subject to the blockchain's specific minimum transaction fee.

Pros and cons:

+low withdrawal fee
+big volumes
-slow withdrawals

OPEN ACCOUNT

Exchange: OKEX

OKEX is multi-cryptocurrency exchange allowing users to trade cryptos and fiat-backed tokens. OKEX also provides digital asset based futures with multiple leverage choices. OKEX has also built a suite of algorithmic trading tools designed for the professional traders. Additional products include a wallet, vault and a block explorer.

Pros and cons:

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