What is arbitrage?

 

Arbitrage is the safest way to make a lot of money

Arbitrage is profiting from a difference in prices of the same item. You buy from a low market and quickly sell to a high market.

Arbitrage can be hard work, but it's the safest way to make a lot of money. Before you buy, you already know where you are going to sell. You know how much you'll get. You buy and sell at almost the same time. You get your profit in days or less. You don't have to wait months or more. You take your profit now. The biggest benefit is that your money compounds fast, over and over.

"Buy low and sell high" is what every business does. Wholesalers, exporters, and importers do it across markets. Online arbitrage is faster and safer.

Cryptocurrencies have created completely new arbitrage opportunities. There are many exchanges. They all have different prices, often very different. They are online. Transactions happen lightning fast by historical standards.

Here's the real secret: Accelerated compound interest. Your trades are complete in days or hours, not in months or years. That means you can reinvest your money many more times each year. The results are so astonishing you should calculate them yourself to believe them.

How bitcoin arbitrage works:

  1. Find the opportunities.
  2. Buy bitcoin at an exchange where the price is low.
  3. Move your bitcoin to an exchange where the price is high.
  4. Sell bitcoin at the exchange where the price is high.

With DeNova , the whole process can happen in minutes under your guidance. Or software can trade even faster, called algorithmic trading.

With arbitrage, the price of Bitcoin doesn't matter. The single "price" you see in the media is usually a quote from just one exchange. Different exchanges have different prices. It doesn't matter if the price is going up or down. Volatility is an advantage, not a problem. What matters is that you can buy and quickly sell higher. Then do it again over and over.

So why isn't every Bitcoin investor a billionaire?

  • Not everyone knows how arbitrage works.
  • Most trading platforms support just one exchange.
  • Not all exchanges are honest.
  • Transactions can sometimes take a lot longer than expected.
  • When you go to or from fiat currency, there can be huge delays.
  • The biggest delays are from AML (Anti-Money-Laundering) and KYC (Know Your Customer) laws.
  • There's always slippage to cut your profit.
  • Service and withdrawal fees from some exchanges can kill any profit.
  • Some exchanges hate arbitrage. They want want captive traders, and may work to slow or stop you.
  • Sometimes they are front running.
  • Arbitrage is less exciting.

You can bypass or mitigate all these issues. For example, you can detect front running by tracking how much slippage is in your favor. A workaround for many AML/KYC delays is to use unregulated exchanges. Remember, regulated definitely does not mean insured. Unregulated often just means the exchange doesn't accept U.S. dollars. Just keep your trades in cryptocurrencies as long as possible.

This is very different from investing in stocks.

Stocks Bitcoin arbitrage
Traded on one exchange Traded on many exchanges
Brokerages required Direct trade
Heavily regulated Generally unregulated
Stock index funds are low risk and low return Probably best risk-adjusted returns available

 

There are many other differences. The risks are very different. The spread isn't just the difference between bids and asks on a single exchange, but between the lowest and highest prices across multiple exchanges. A trade usually refers to a round trip trade, including both buying and selling.

Arbitrage has rarely been this profitable. It's never been this easy.