Hi all!
Today I want to tell you what is cryptocurrency arbitrage.
Arbitrage is a trading strategy that involves the simultaneous or almost instantaneous execution of two or more transactions of different directions.
The purpose of an arbitrage operation is to capitalize on the effective use of discrepancies in asset prices across different markets and trading platforms.
Arbitrage is considered a strategy with minimal risk. To implement it, it is not necessary to use price movements and predict the rate of cryptocurrencies.
A consequence of the low level of risk in arbitrage is also its low rate of return on trades. The strategy requires large cash investments to create working capital.
Types of Arbitrage Operations
Exchange arbitration
The easiest way, involving the fastest possible purchase and sale of the same asset on various exchanges or platforms. In the event of a price discrepancy for an asset, a trader purchases a cryptocurrency on one platform at a conditional price of $100 and sells it for $101 on another. The $1 difference is the very arbitrage opportunity and market inefficiency used by traders.
Triangular Arbitrage
This type of operation involves the use of several trading pairs on one or more platforms. This strategy assumes that the trader has found a pricing inefficiency in a chain of speculative transactions.
Let’s say BTC/USD = $20,000, BTC/ETH = 0.05 BTC, ETH/USD = $1010. In this case, the trader buys 1 BTC for $20,000, then exchanges 1 BTC for 20 ETH and completes the chain of operations by exchanging 20 ETH for $20,200. The profit per operation is $200.
And here is a recent story with GALA, but against this background, many earned good money, and professional arbitrageurs were able to increase their capital.
Blockchain gaming firm Gala Games is at the center of controversy after an unknown miner issued a billion dollars worth of GALA tokens.
The gala token (GALA) plunged 25% amid the issuance of ten billion tokens worth almost a billion dollars. The first person to report the incident on Twitter was @megbzk.
