Crypto Arbitrage for beginners: What is it and how does it work (Part 1)
Updated: Jun 30, 2022
Crypto arbitrage is the practice of buying and selling cryptocurrencies in different markets to take advantage of differing prices. It is a trading strategy that offers attractive rewards at a relatively lower risk.
When done right, arbitrage trading allows investors to make low-risk profits. But as in most speculative markets, this trading strategy comes with risks and complexities. For beginners, it may come with a sharp learning curve.
Learn the basics of crypto arbitrage in this guide.
What is crypto arbitrage trading?
Crypto arbitrage is derived from a traditional currency exchange practice known as arbitrage that dates back to the 18th century. It’s a straightforward practice where you buy currency where it has the lowest price, then sell it to a market where its price is higher.
How does it work?
Cryptocurrencies such as Bitcoin (BTC), Ether (ETH), Litecoin (LTC), and Binance Coin (BNB) have differing prices across exchanges. These coins may exchange higher or lower, allowing traders to earn profits from the price discrepancies. But successful arbitrage trading depends on various factors like liquidity, trading volume, and fees.