Investors all over the world are making millions of dollars from the volatile crypto market. This is possible due to cryptocurrency and bitcoin price arbitrage. Bitcoin is one of the most popular cryptocurrencies in the world, making it acceptable in most countries. Bitcoin arbitrage is the process of selling and buying Bitcoin on multiple exchanges when the price of Bitcoin is high and low respectively. Since the crypto market is unregulated, disjointed, diffused, and not directly linked, the prices of bitcoin vary across different exchanges.
In any given day, the price of bitcoin can vary from one exchange to another by anywhere from 0% to an amazing 14%, these are general fluctuations, some of which are extreme during volatile trading days . For example, at the time of this writing, the price of Bitcoin is approximately $9000 on the Coinbase exchange, while the price is pegged at $8438 on BTC-E exchange, creating a nearly 7 % difference of $562.
The price difference creates a huge opportunity for investors to make a huge profit via arbitraging. Also, as of Thursday morning, cryptocurrencies hit a highly significant level on most exchanges in Asia, however, at about the same time 1.30pm on several Western exchanges, the prices were lower.
Here is a snapshot of a trade opportunity example by using BTC traded in pairs from USD to the Japanese Yen:
This inconsistency in the prices of cryptocurrency highlights the golden opportunity that investors are leveraging to make millions of dollars.
Brian Kelly, an investor, and a financial market commentator said in a recent interview on the coin rush show that “Tether is a big part of this ecosystem. The real use case for Tether is for global arbitrage. So what you see happen is when Bitcoin falls quite a bit like 10 or 20% in a day, you see the exchange prices get disconnected. And then what would happen is that people would use Tether to buy Bitcoin at a lower price on exchanges in Hong Kong or Japan and bring it over to the US to sell at higher prices. This is not the first time price variation between exchanges at a different location will occur.”
Most investors in the United States are happy with this development. “Arbitrage has made some of us in the know richer. For instance, I used to make an average of $3000 in a month, but right now since I discovered the huge opportunity in arbitraging, I make a net value of about $5000 on the average”, said by a happy investor Mr. Edward Bush.
Mr. Charles Hayter, a senior analyst and founder of Cryptocompare reechoed the position of Brian Kelly in an email. “Japanese investors have held sway in Bitcoin bug, translating into inefficiencies of the market being exposed.”
Arbitraging is location independent, meaning that investors can operate from anywhere in the world, provided they have partners in Asia. “Most people that are into arbitraging have offices throughout the world, while some are physically based in Asia. Some of the arbitrage is because there is structural friction. For example, in Korea, it is very difficult to get money out of the country. At times, Korea has traded up to 30% and spread to the rest of the world. So if you have a Korean partner, you can arbitrage successfully,” Brian Continued.
In other money markets, this notable mismatch in price would have been closed within seconds because the lower priced asset would have been purchased by algorithmic trades and then sell on a higher price exchange.
So do you think that arbitrage is a real business opportunity? lets us know with your comments below, and another bonus video that briefly discusses arbitrage at the initial part of the video,