Author: Eduardo Montero
Crypto arbitrage is one of the trading techniques that has given enviable returns with a priori little risk. For Bitcoin, Ethereum and the most capitalized cryptocurrencies, arbitrage has been among the most sought after strategies by many traders. It can be said that finding a way to arbitrage cryptocurrencies is one of the holy grails of trading.
- Cryptocurrency arbitrage is a strategy pursued by many crypto traders.
- Sell on exchanges where the price is high and buy where it is cheap.
- Triangular arbitrage is another strategy that takes place on a single exchange.
Arbitrage for any asset is very interesting, but what makes cryptocurrency arbitrage so much more special? How is it done? And most importantly, can it be automated? Let’s break down all the keys that any trader should know.
Best Bitcoin and Crypto Arbitrage Bots in 2024
The platform we choose to do automatic arbitrage is crucial for the final result and profitability. Knowing how to choose the right platform or cryptocurrency bot is essential to be the fastest and avoid losses.
These are the best cryptocurrency arbitrage bots:
1. Cryptohopper
Cryptohopper offer the two types of cryptocurrency arbitrage bots we mentioned: triangular arbitrage and cross-exchange arbitrage. They launched them in 2018 and 2019 respectively and have been very well received by the community.
The cross-platform arbitrage bot is available for $49 per month with the Adventurer subscription and allows you to connect multiple exchanges to find opportunities.
On the other hand the triangular arbitrage bot or market arbitrage as Cryptohopper calls it is offered with the Hero subscription, which is priced at $99 per month.
Cryptohopper’s arbitrage bots are among the most recognized in the industry. Their online platforms allow them to be easily configured and used. In addition, their statistics represent in detail the currencies used and the profitability obtained.
One of the great advantages of using Cryptohopper arbitrage is that it can be tested in paper trading mode, i.e. with virtual funds. So it is ideal for testing the strategy before investing your money.
Start your automatic arbitrage!
More info: https://www.cryptohopper.com
2. HaasOnline
HaasOnline makes available both in its downloadable software and in its online version a cryptocurrency arbitrage bot between exchanges.
This platform offers a downloadable version that looks more professional. However, the handicap of the downloadable versions is that they only allow the bot to operate 24/7 if the user downloads a VPS. In addition to only being able to use it on one computer.
To use this cryptocurrency arbitrage bot you must have access to the Advanced version with a price of 0.075 BTC.
More info: https://www.haasonline.com/
3. Gunbot
Although it is in its Beta version, Gunbot is going to launch its own arbitrage robot for Bitcoin and other cryptos. It will be called BitRage and by 2022 it is fully operational.
As with the HaasOnline cryptocurrency bot, Gunbot is a downloadable software that also has no online version. Gunbot has proven to be a reliable bot, however as the arbitrage functionality is new we should be careful when using it.
Therefore, if chosen, it is recommended to start with rather small amounts and arbitrage in currencies with sufficient liquidity.
More info: https://www.gunbot.com/
What does cryptocurrency arbitrage consist of?
Arbitrage is a technique based on finding different prices for an identical product or service. When this happens, there is an opportunity to make a profit by buying that product in the cheap place and selling it in the expensive one.
For example, imagine a Stanley brand drill, a product that is sold all over the world. If it were to sell for $40 in Colombia and $60 in Spain, there would be an arbitrage opportunity by buying drills in Colombia and selling them in Spain. More precisely, there would be an arbitrage opportunity with $20 profit per unit.
Now, let’s take this to the field of cryptocurrencies. The places to buy, sell and exchange Bitcoin and other cryptos are exchanges (cryptocurrency buying platforms). So if the price of a coin is different on two exchanges, there is an arbitrage opportunity.
Let’s take another example, this time with Bitcoin. In periods of volatility, price differences between exchanges are greater than when the price does not vary much. Thus, an arbitrage opportunity is generated between exchange A and B.
Between the two there is a 1% price difference that lasts about 15 minutes until the prices between exchanges are equalized. The trader who manages to buy BTC on the cheap platform and sells them on the expensive one, will get 1% of the money he invested (minus commissions).
Types of crypto arbitrage
The best known cryptocurrency arbitrage is the one between two exchanges. However, it is not the only one. There is another one called triangular arbitrage or intra-exchange arbitrage in which only one exchange and 3 cryptocurrencies are needed to do it. Let’s take a look at both types of arbitrage:
1. Cryptocurrency arbitrage between exchanges
This is the most common and well-known. As mentioned above, this type of cryptocurrency arbitrage is based on taking advantage of price differences of a pair in two exchanges. In order to operate this arbitrage opportunity, the following steps must be followed:
- Find a price difference between exchanges for a cryptocurrency (pair) that covers the trading commissions of the exchange. Usually to cover all commissions the minimum profit is 0.3%.
- Buy that cryptocurrency on the cheapest exchange.
- Sell the purchased amount on the most expensive exchange.
- The difference in price between the two exchanges minus commissions is the profit.
2. Triangular arbitrage with cryptocurrencies
Although it may seem difficult to understand when you first hear it, it is possible to make money with an arbitrage strategy on the same exchange. It is possible, very profitable and an established technique in the crypto trading world.
The triangular arbitrage consists of making 3 operations in the same exchange to make a profit, that is, buying 3 different cryptocurrencies very quickly so that in the end you get a greater amount of your base cryptocurrency.
Suppose there is a triangular arbitrage opportunity on our exchange buying EOS and ADA, the base currency in which we have funds being Bitcoin.
- With the Bitcoin in the portfolio we buy EOS (1st trade).
- With the new funds in the EOS currency ADA is purchased (2nd trade).
- With the funds in ADA is bought back Bitcoin (3rd trade).
Finally, once the third and last trade has been made, and if the triangular cryptocurrency arbitrage operation has been successful, there will be more Bitcoin in the portfolio than before.
Commonly, these trades usually offer a return that usually hovers between 0.25% and 1%.
How do Bitcoin and other crypto arbitrage bots work?
To create an arbitrage bot, you commonly have to configure the following parameters:
- Set an average profit. For example, if it is 0.50%, the cryptocurrency bot will only look for opportunities that offer at least that percentage of profit.
- Select the cryptocurrencies you want to do crypto arbitrage with. You may not care which coins to trade or you just want to play a selection of them, in this step you can choose.
- Select the exchanges where you want to do exchange arbitrage. This only applies if you are going to do arbitrage between different platforms. For triangular arbitrage it does not matter.
- Determine a stop loss. Although it is arbitrage, something may go wrong, the market may move quickly and we may have losses. For this, it is essential to have a stop loss activated.
The other settings will depend on the cryptocurrency bot chosen.
Cryptocurrency arbitrage with bots.
This crypto strategy offered high returns in the past, as there were more and less liquid exchanges that showed price divergences for cryptocurrencies or equal pairs.
In addition to the fact that not having a highly developed infrastructure, these price differences were not quickly reduced. Subsequently, the Blockchain industry was developing and there were fewer and fewer opportunities in the market. And those that did exist lasted less time.
Then, in order to achieve a profitable strategy they resorted to automatic cryptocurrency arbitrage by means of bots. A way to automate the strategy to be the fastest in the market and achieve positive returns.
This is as far as the article goes. We hope you find it useful. You can also check this other one in which we analyse the best crypto bots to automate cryptocurrency trading.