Earning Money from Crypto Price Discrepancies: Low-Risk Profit Strategies You Should Know

When it comes to income in the cryptocurrency market, most people only think about buying low and selling high. But the question is: is that the only way? The answer is definitely not. In fact, modern cryptocurrency investors have many ways to profit, among which crypto arbitrage ( or also called arbitrage) is one of the most popular methods due to its low risk and quick profit potential.

What Is Crypto Arbitrage?

Simply put, this is a strategy that exploits price differences of the same cryptocurrency across different exchanges. Why do these differences exist? The main reason lies in the imbalance of supply and demand between trading platforms.

Unlike regular trading that requires technical analysis or market psychology, this strategy is much simpler. All you need to do is detect the price discrepancy and act quickly, as these opportunities only last for a few seconds or minutes before prices balance out again.

Types of Price Discrepancies You Can Exploit

1. Standard Price Discrepancy Between Exchanges

This is the most common type. You buy cryptocurrency on an exchange where the price is lower, then immediately sell it on another exchange where the price is higher.

Real-world example: At a certain point:

• On exchange A: Bitcoin (BTC) priced at $21,000
• On exchange B: Bitcoin priced at $21,500

You can buy 1 BTC on exchange A, sell on exchange B simultaneously, and earn a profit of $500 (after fees). However, to do this successfully, you need to act extremely fast and use automation tools.

Professional arbitrage traders:

• Keep funds on multiple exchanges simultaneously
• Connect APIs from exchanges to monitor prices continuously
• Use automated bots to detect and execute trades instantly

2. Spatial Price Discrepancy

This is a variation of the standard discrepancy, but the exchanges are located in different geographical regions. Local exchanges often have significantly different prices due to regional supply and demand differences.

A typical case occurred in July 2023: Curve Finance (CRV) was traded at over 600% higher on one regional exchange and 55% on another after an incident with this DeFi protocol.

The downside of this method is that local exchanges often restrict users from other regions from registering.

3. Decentralized Price Discrepancy

Prices on DEXs (decentralized exchanges using AMM) can differ significantly from prices on regular CEXs because they price based on internal liquidity provision mechanisms.

You can exploit this difference by buying on DEX and selling on CEX or vice versa.

4. Futures Contract Funding Rate Discrepancy

When trading futures contracts, you will encounter the concept of “funding fee.” If too many people are long, they pay fees to short sellers. You can exploit this fee by:

• Opening a futures position (long position with funding)
• Simultaneously hedging with an opposite trade on the spot market
• Profit = received funding fee minus trading fees

5. P2P Price Discrepancy

On P2P platforms, you can act as a liquidity provider. You post both buy and sell ads for the same cryptocurrency, wait for customers to approach, then:

• Buy at a low price from sellers
• Sell at a higher price to buyers

To succeed with this strategy, you need:

• Careful fee calculation: Small capital can be eaten up by fees
• Work with reputable partners: To limit scam risks
• Choose secure platforms: Check security measures and customer support

6. Triangle Price Discrepancy

This is a more complex strategy that exploits price differences among three different cryptocurrencies. For example:

Method 1: BUY → BUY → SELL

1. Buy Bitcoin with Tether
2. Buy Ethereum with Bitcoin
3. Sell Ethereum for Tether

Method 2: BUY → SELL → SELL

1. Buy Ethereum with Tether
2. Sell Ethereum for Bitcoin
3. Sell Bitcoin for Tether

This type of trading requires high speed and deep market understanding. Most triangle arbitrage traders use bots to automate the process.

7. Option Price Discrepancy

This is an advanced strategy based on the difference between implied volatility (market’s forecast) and actual volatility (what actually happens) with cryptocurrency prices.

You can:

• Buy call options when you believe the market has undervalued
• Use put-call strategies when detecting mismatches between spot prices and combined option prices

Why Is Crypto Arbitrage a Low-Risk Strategy?

Regular traders often spend time analyzing technicals, market psychology, and future trends. This is labor-intensive and risky because predictions can be wrong.

In contrast, price discrepancies are entirely different:

• No prediction needed: You only need to detect current differences, not forecast the future
• Short time frame: The entire transaction usually takes a few minutes (often just seconds)
• Automatic risk reduction: Because of quick order execution, you avoid long-term risks like regular trading
• Based on objective data: Price discrepancies are an objective phenomenon, not dependent on psychology or predictions

Main Benefits of This Strategy

Quick profits: You can make money in a few minutes if you act fast

Abundant opportunities: According to October 2024 data, there are over 750 cryptocurrency exchanges worldwide. Each exchange usually has slightly different prices, creating countless arbitrage opportunities

Market still young: The crypto market is still developing, with new exchanges opening every day. Price information is not fully shared, leaving “gaps” to exploit

High volatility: The crypto market is more volatile than traditional markets, creating more arbitrage opportunities

Challenges You Will Face

Need to use bots: Price discrepancies only last a few seconds. Manual execution will miss most opportunities. Trading bots are almost essential

Trading fees: There are many types of fees: exchange fees, withdrawal fees, transfer fees, network fees… All can eat into your profits if not calculated properly

Small profit margins: Each trade typically yields only 0.5% - 2%. You need a large initial capital for meaningful profits

Withdrawal limits: Most exchanges impose daily withdrawal limits. Even if you profit, you might not be able to withdraw immediately

Large initial capital: Due to small profit margins, you need a sufficiently large initial capital (usually over $10,000) to make reasonable profits

Role of Trading Bots

Automated bots operate continuously, scanning hundreds of exchanges for arbitrage opportunities. When they detect an opportunity, they can:

• Send you notifications (you decide whether to trade)
• Or automatically execute trades (if authorized)

Bots eliminate human factors, helping you avoid missing opportunities due to slow reactions.

Conclusion: Should You Try It?

Crypto arbitrage is a legitimate, invariant, and lower-risk strategy compared to regular trading. However, you need to:

1. Research thoroughly: Understand each type of discrepancy, fees, and risks
2. Prepare capital: Not too small, as profit margins are limited
3. Choose the right tools: Quality trading bots are essential
4. Stay vigilant: Avoid untrustworthy exchanges and potential scam strategies

If you have the resources and are willing to learn, crypto arbitrage can be a great addition to your cryptocurrency investment portfolio.