What's up, everyone? Did you know that there is a trading technique that involves taking advantage of one-time differences in crypto prices or rates to make insane gains? This technique is called crypto arbitrage. Today, we are going to focus on one particular arbitrage strategy. And this strategy is called triangular crypto arbitrage. It involves trading three different cryptos on a single exchange. So, in this case, transfer fees shouldn't be an issue because it's all happening on one exchange.
Watch this video to the end to find out how it works. We'll also share with you an automated triangular arbitrage platform that will help you implement this strategy more efficiently.
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Triangular Arbitrage is used when a trader would like to use the opportunity of exploiting the arbitrage opportunity from three different FX currencies or Cryptocurrencies. Triangular Arbitrage happens when there are different rates within the trading venue/s.
In practice, Triangular Arbitrage refers to a trading opportunity when there’s a discrepancy between the rates of three currencies such that they do not exactly match up. One can then place simultaneous trades to buy one currency and sell another, both trades being conducted in a third currency, and benefit from the discrepancy in exchange rates.
Here’s an example. Let’s say the BTC to the XRP exchange rate is 0.00002645. So, when you spend 1 BTC, you get 31697.38 XRP. With this 31697.38 XRP, you purchase Ethereum XRP to ETH exchange rate of say 677.0367. So, you now have 56.98 ETH If the ETH to BTC exchange rate is 56.17, then you can exchange your 56.98 ETH for BTC and get back 0.81 ETH. Here, you’ve successfully executed a Triangular Arbitrage by spending 1 BTC and getting back BTC 1.014. That’s the profit with no risk since these trades are conducted simultaneously.
Triangular arbitrage is a risk-free trading opportunity, where the trader benefits from marginal differences in asset prices. But there are intrinsic risks.
Triangular arbitrage involves a large initial investment, mainly because the price difference between the currencies is usually small. To make a substantial profit, you need to trade large volumes. Using a margin will multiply your risk.
Most financial textbooks assume that the markets are efficient and therefore an arbitrage opportunity simply cannot occur. Fortunately, the reality is far from the theory and traders have found a way to exploit it.
Data accuracy requirements are the number of decimal places each market accepts on exchange for order amounts and rates. Exchanges create these limits so that you can't trade extraordinarily small amounts, and each trading pair on an exchange may allow a different number of decimal places. If an arbitrage opportunity arises that would require order amounts of 0.65201 BTC on two exchanges, but one exchange only allows three decimal places, you will not be able to submit those orders.
There are different approaches to buying and selling the 3 assets to make a triangular trade.
In the example above, we start with ETH as our initial investment. After making all three trades, we end up with ETH at the end.
For the second approach, as for the first approach, let's use memes to check for arbitrage opportunities in a different flow. In the example above, the following 3 trades are evaluated:
Now, as with most walks, this technique has benefits and downsides.
Since we are buying and selling the asset simultaneously, there is no risk like in long-term investments. Arbitrage trading is a good way to trade in volatile markets without taking too much risk. You can make money regardless of the direction of the market. That said, there will be more arbitrage opportunities during massive bull markets. This is because traders are more interested in profiting from the upside than in arbitrage. The best part is that you can make profits even in a volatile market, such as crypto-currencies.
Now, in order for you to be aware of the risks, let's also talk about the downsides
Since most of these trades will be done on exchanges, your exchange can close and take all your capital with it. This would not happen if you use reliable exchanges. So it is advisable to use exchanges such as Binance, Gate.io, and others. Because not only are they regulated, but they also have more liquidity.
Considering the costs and stability of the market, the price difference of crypto-currencies must be high enough for you to be profitable in arbitrage.
Regulations such as KYC and AML can have an impact on cross-border arbitrage.
New traders may jump too quickly on an asset without considering all the ways the arbitrage could go wrong. Therefore, it is essential to have trading experience and knowledge of market fluctuations.
If you want to earn more money in crypto arbitrage, you need to use the latest technologies that allow you to trade fast enough to make profits. For that, the platform we are going to share with you is called KoinKnight.
KoinKnight is the Google for arbitrage traders, as per their website it is an arbitrage search engine that allows its users to take quick decisions and make huge profits without taking much risk.
It is an automated price tracking and showing a profit by using exchanges API. The prices provided are for real-time and they can change anytime if you want to make a profit then do check prices on exchanges as well. But things to remember here is that not all supported exchanges are active, they have listed some inactive exchanges too in their list, but not to worry as they will not appear on your trading list.
The main feature of KoinKnight is arbitrage, which we all know. You can find arbitrage opportunities for different coins and exchanges.
Users can set alerts for specific coins and exchanges. You will get notified of each activity for the selected coin. You can compare the prices from the order book itself.
They have an attractive referral commission program. You can earn up to 20% of the referral commission. Of course, it is important to make this clear. This video is not sponsored.
Now, you are probably wondering if KoinKnight is legitimate or a scam. Well, we haven't found any compromising information about it. Although some people claim that KoinKnight is a scam. Just like almost every other arbitrage platform out there. Anyway, we should not rule out any possibility. You should be aware of the risks before using it.
But the most important thing we have noticed is that they are very active in their social media where they try to provide help as well, so far most of the customers are satisfied with their platform.
Cryptocurrency arbitrage is all about leveraging prices to make a profit. People have been trading crypto for years, but each exchange sets unique values for each currency for various reasons. Cryptocurrency arbitrage aims to help investors profit off of those price differences.
However, it's risky, the crypto market is known for its volatility. Cryptocurrency arbitrage is a technique that gives traders a chance to profit from the market's inefficiencies. These trades must get made instantly and simultaneously to earn a profit since the market fluctuates constantly.
Now, there are so many more altcoins on the market right now and we think there are many better ways to get in and make profits by trading them smartly through crypto arbitrage.
Let us know in the comments section below if you want to know about other crypto arbitrage platforms.
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