Crypto Arbitrage Benefits, Risks, and Costs - Crash Course

31 Questions and answers about crypto arbitrage. If your answer's not here, just ask.

What is crypto arbitrage?

Crypto arbitrage is an advanced trading strategy. It brings the low risk and high profitability of arbitrage to trading crypto currencies.

How does cross-exchange crypto arbitrage work?

  1. Find a crypto exchange with a low price and one with a high price.
  2. Buy from the exchange with a low price.
  3. Immediately sell to the exchange with a higher price.
  4. Get quick safe profit.
  5. Repeat.

What are the main benefits of crypto arbitrage?

It's one of the safest and most profitable investment strategies.

Trade with much less risk, and more profit. Unlike other trading strategies, with arbitrage you know your sell price before you buy. So if there's not enough profit right now, you don't buy. Bad trades are rare.

Take your profit now. Don't waste time waiting for a price to change.

Get plenty of profitable opportunities. There are about 1000 crypto exchanges, all with different prices.

Trade anytime. Exchanges are open 24/7.

Grow your money faster. A round trip trade usually takes just hours or days. Every time you reinvest your profits in a trade your money compounds. Get many more compounding periods in the same calendar time. Watch your wealth grow much faster.

Why is crypto arbitrage safer?

With arbitrage, you know your sell price before you buy. If you can't sell at a good price, you simply don't buy.

Don't try to predict the future. Don't wait for the price to move. Take your profit now.

No worries. No waiting. That's pretty safe.

What makes crypto arbitrage so profitable?

You win almost every trade. Losses are rare. There are plenty of good trading opportunities. Trades are usually completed in hours or days. Your money grows fast.

How does crypto arbitrage make your money grow fast?

Each trade is effectively a compounding period. A trade takes just a few hours or days. That can mean a hundred or more compounding periods a year. For example, 2% or 3% a year from a bank isn't much. But 2% compounded 100 or so times a year is fascinating.

But doesn't my bank pay 2% or more compounded daily in perfect safety?

Remember the usual interest rates you see are an Annual Percentage Rate. The bank rate compounded daily is the APR divided by 365 days.

Your crypto arbitrage rate is per trade. A trade takes just a few hours or days. You can often safely make about as much in a day as the bank pays in a year.

What are the advantages of arbitrage?

  • Win almost every trade. You know your sell price before you buy. If you can't sell at a good price, you simply don't buy.
  • No waiting. Take your profit immediately.
  • No trying to predict the future. All you need is current prices.
  • Bad trades are rare. There's almost no risk that you'll have to sell at a bad price. With most trading strategies that's your biggest worry.

What are the disadvantages?

  • It's not a casino. There's no gambler's high.
  • You won't get rich quick.
  • There's some work required.

What are the advantages of cross-exchange crypto arbitrage?

  • Prices up. Prices down. Doesn't matter. There are always exchanges with different prices.
  • No worries about volatility. In fact, that's usually when price spreads between exchanges are best. You make more money.
  • Get many more opportunities. There are about 1000 exchanges, all with different prices. They are online and open 24/7.
  • You don't need a complex and expensive day trading setup with multiple monitors. Your phone is fine.
  • Trade whenever you like. Exchanges are open 24/7.
  • Quick trades without the stress. You can complete a round trip trade in days, sometimes in hours. That can mean a hundred or more winning trades a year.
  • Your money grows fast. Each trade is effectively a compounding period. A hundred compounding periods a year turns small gains into impressive profit.
  • Bad trades are rare. There's almost no risk that you'll have to sell at a bad price. With most investments that's your biggest worry. If for some reason the sell side of your trade doesn't work out, it's usually not a big deal. You bought from an exchange with a low price. There are likely other exchanges with high prices right now where you can still sell at a profit.
  • Plus all the advantages of arbitrage:
    • Win almost every trade. You know your sell price before you buy. If you can't sell at a good price, you simply don't buy.
    • No waiting. Take your profit immediately.
    • No trying to predict the future. All you need is current prices.

What good opportunities are there right now?

Best Arbitrage Opportunities

Why is TopArb your best choice for crypto arbitrage?

  • You get much more profit. TopArb monitors 187 exchanges for you. It then selects the best opportunities right now. You get much wider spreads between buy and sell prices. That means much more profit.
  • We don't handle your money or violate your privacy. Your money and financial details go directly between you and the exchanges where you have accounts.
  • We never have your keys or passphrases for your exchanges. If you don't want to enter your credentials every time, they are stored on your own phone or other device in your local browser storage.
  • We never track your transactions or trades. We do know if you're a customer, where you have accounts, and when you're trading. TopArb lets you easily place your orders directly from your phone or other device to each exchange. We don't know how much, which currencies, or if you even completed an order.

What proof is there that arbitrage works?

The best proof: Prove it for yourself with our FREE 30 DAY TRIAL.

Wikipedia says it's been working since at least the 1500s.

Harvard Business School quotes Igor Makarov (London School of Economics) and Antoinette Schoar (MIT):

"There are large and recurring deviations in bitcoin prices that open up across different exchanges and often persist for several hours, and, in some instances, days and weeks."

Hedge funds have been quietly reaping profits from arbitrage for many years.

What are the main risks?

Arbitrage is comparatively very safe, but of course there are risks.

Like many other investments, the single biggest risk is leverage. As Warren Buffet says, "Leverage is addictive." It's the most common way that experts go broke.

Trading with borrowed money greatly increases your potential profit and your potential risk. Exchanges often call leverage "margin" or "gearing". By any name, it's a loan.

Leverage is also an extra expense that makes you miss otherwise good trades.

There's a simple solution. Don't trade with borrowed money. It's a terrible choice for almost all traders.

The other main risk is that not all exchanges are perfectly reliable all the time. The exchanges are your counter-parties in trade, and it's important to evaluate them carefully. Here's How to evaluate exchanges.

Aren't all the arbitrage opportunities gone?

Maybe arbitrage is too crowded in legacy markets like stocks and oil. But in crypto there are still many good opportunities.

There are about 1000 crypto exchanges. They all have different prices, often very different.

If your scanner service monitors enough exchanges, finding profitable opportunities is easy. You don't have to wait for rare unicorns.

How much do I need to get started?

$20,000 total is plenty. But you can begin with less. It just takes more time to grow.

You need:

  1. Some capital.
  2. A subscription to an exchange scanner service to find the best opportunities
  3. About $500 initial deposit for each exchange you choose.

You definitely don't need an expensive hardware setup with multiple huge monitors and a blazing fast net connection. Just a phone will do.

$10,000 capital is plenty to get started. Of course the more you invest the more you make. A scanner service can cost a few hundred or a few thousand a year, depending on quality. Without it, you'll miss the best opportunities. Let's assume $5000, because you want to make money. If you select 10 exchanges for your trades, you'll need about $5,000 to cover all of their initial deposits. That adds up to about $20,000.

How long does it take to start trading?

It might be a week or two. First you have to choose your initial exchanges. They may take a few days to verify your identity. It's also a very good practice to have your own independent wallets for bitcoin and any other crypto you want to trade. Loading the initial data for a wallet can take a few days.

What are the ongoing costs?

Your recurring costs include:

  • Exchange charges of all kinds
  • An exchange scanner service to find the best opportunities
  • Bank charges when you trade dollars or other fiat currency

Exchanges can be very creative in the variety of their charges.

What infrastructure do I need?

An opportunity subscription and a phone. That's really it.

Your independent wallets for bitcoin and any other cryptos you want to trade need an ordinary desktop system.

You definitely don't need an expensive hardware setup with multiple monitors and a blazing fast net connection.

How much of my time will crypto arbitrage take?

Several hours a week. You need to evaluate the opportunities, place and follow up on your trades, and review news about exchanges.

How much money can I make?

Probably a lot more than you think. Here's a calculator. Your return depends on how many trades you make, your net profit on each trade, the size of each trade, and how fast the trades complete.

The most important factor is to trade as fast as you safely can. Every trade is effectively a compounding period for your money. The more compounding periods in a calendar period, the faster your money will grow.

Can I get reports on exchanges?

Coming up soon. Reviewing exchanges can be time consuming. A good report service will cover news, performance metrics, and trust metrics.

What crypto arbitrage platforms are available?

The critical difference between crypto arbitrage platforms is how many exchanges they scan. More exchanges means many more and better opportunities for you. It's smart to pick the leader.

TopArb monitors 187 exchanges. No one else comes close.

Here are some other platforms:

How wide do spreads get?

Your profit on a trade depends mostly on the spread between your buy price and sell price. Spreads are usually more than 2%, and often 5% or more.

Volatility in world markets tends to widen spreads. When the 2023 Gaza War started, spreads leaped to 8% with a spike at 10%.

What is the smallest spread I should accept?

A good rule of thumb is to only take trades with a spread of 2% or more.

Reject any trade that doesn't cover your costs. Always calculate your returns based on the spread, size of the trade, and your costs.

Ok, the Big Question: How long does it take to make a million dollars?

Probably a lot less than you think. Calculate your growth for yourself.

Of course, catastrophes do happen. But with arbitrage, they're much less common.

Where are the charts?

No charts needed with crypto arbitrage. You aren't watching trends or magic patterns. All you need is prices right now. You don't have to try and predict the future.

Isn't that great?

Can I get a bot to do all this for me?

Sure. But remember that bots are software. Software has bugs.

Even the most advanced AIs usually need a human to check their work.

A trading bot bug can wipe you out. If you hand your money to a bot, that's a big risk.

It's easy to avoid that risk. Use a bot to find opportunities. Then you make the decisions.

What are crypto markets?

In crypto arbitrage, crypto markets are usually currency pairs. They look like this: BTC/ETH.

BTC and ETH are the currencies in a trade. BTC is Bitcoin and ETH is Ethereum. The first currency is the currency you're buying or selling, called the "base" currency. The second currency is the one used for payment, called the "quote" currency. For any base currency you want to buy or sell, the price is expressed in the quote currency. So BTC/ETH is the price of one Bitcoin paid in Ethereum.

The price for BTC/ETH is different depending on whether you're you're buying or selling BTC. If you want to buy BTC and pay in ETH, the market is called "BTC/ETH". And if you want to sell BTC and get paid in ETH, the market is still called "BTC/ETH".

You can find price quotes for almost any crypto currency. Usually an exchange offers a buy price and a sell price. On any single exchange, the price you get if you want to sell is lower than the price when you buy. Otherwise the exchange would lose money.

Got a question that's not covered here?

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