Alternative methods of P2P arbitrage in cryptocurrency

What is cryptocurrency arbitrage?

Cryptocurrency arbitrage is a trading strategy that involves buying an asset on one market and immediately selling it on another with the aim of making a profit from the price difference. This practice helps to eliminate price discrepancies between different trading platforms.

Key Features of Arbitrage Trading

Arbitrage trading theoretically features a low level of risk; however, it requires a high speed of trade execution, often utilizing automation. To achieve significant profits, large trading volumes are usually necessary.

Types of Arbitrage in the Cryptocurrency Market

There are several types of arbitrage in the crypto market. Intra-platform arbitrage uses price differences between pairs on the same platform. Inter-platform arbitrage exploits price differences between different trading platforms. International arbitrage focuses on price differences between exchanges in different countries. DeFi arbitrage leverages opportunities in decentralized financial protocols.

Arbitration Chains and Tools

Traders use "arbitrage chains" - algorithms that describe where to buy and sell assets to make a profit. These chains can involve multiple steps and use various trading pairs.

Searching for Arbitrage Opportunities

To find arbitrage opportunities, traders use various tools. Data aggregators collect price information from different platforms, specialized scanners automatically search for arbitrage opportunities, and social channels, including Telegram groups and forums, serve as additional sources of information.

Legality and Risks of Arbitration

Arbitrage is generally considered legal if regulatory requirements are met. The main risk is associated with potential accusations of money laundering. Professional arbitrageurs usually have accounts on multiple platforms to access a greater number of opportunities.

The Current State of Crypto-Arbitrage

Although in the early days of cryptocurrencies arbitrage was more accessible to retail traders, now this niche is mainly occupied by professional market makers and trading bots. Nevertheless, opportunities still exist for experienced traders willing to invest time and resources into this strategy.