What is crypto arbitrage and how does it work?

Cryptocurrency arbitrage allows you to take advantage of those price differences, buying a crypto on one exchange where the price is low and then immediately selling it on another exchange where the price is high. However, there are several important risks and pitfalls you need to be aware of before you start trading.

What is arbitrage trading?

This is the type of arbitrage trading in which you simply buy from one exchange and sell on another. It involves only two exchanges. Since arbitrage trading of this type depends on the real-time prices of assets, it is impractical to buy assets on one exchange and transfer them to another exchange to sell.

What are the best coins for crypto arbitrage?

XLM, XRP and NANO are a few of the coins that work best for this type of arbitrage trade. A more sophisticated approach to crypto arbitrage is to hold cryptocurrencies on two different exchanges. Whenever there is a price discrepancy, the arbitrage trader can buy crypto on one exchange and sell it on another at the same time.

What are the risks of crypto arbitrage trading?

The risks of crypto arbitrage that traders should be aware of are: Transaction fees: Most crypto exchanges make a profit off the transaction fees they charge traders. Although most traders don’t pay much attention to transaction fees, arbitrage traders can lose big chunks of their profits on these charges.