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What is Arbitrage and How Is Arbitrage Made?

The term arbitrage, which has existed for a long time and is known, has started to be very popular in the crypto money markets for a while, and with this, many crypto money investors who are wondering what arbitrage is and how to make arbitrage have started to do research.

With this article, where we provide all the details about arbitrage, you will be able to find the answers to all the questions you hear, want to know and wonder about arbitrage.

What is Arbitrage?

Arbitrage is the process of making profits by taking advantage of the imbalances in different markets. In other words, if an investment tool in a market is sold at a lower or higher price in different markets, it is called arbitrage or arbitrage to make a profit by turning it into an opportunity.

Arbitrage is a risk-free earning system due to its feature. For this reason, many investors who find answers to the questions of what is an arbitrage process or what does arbitrage mean, immediately want to make money with arbitrage by researching how to do arbitrage and examples of arbitrage.

Arbitrage is a transaction that investors have known for a long time and is used very often in exchanges, foreign exchange buying & selling, import and export payments, but it has become a popular term recently, mostly used in crypto money markets. Because crypto money markets are also very suitable for arbitrage, and many investors take advantage of this opportunity. This trend, which started with the question of how to do Bitcoin arbitrage, started the trend of arbitrage transactions between exchanges in all cryptocurrencies over time.

How Is Arbitrage Made?

For cryptocurrency arbitrage, there must be at least two cryptocurrency exchanges that you need to follow. By comparing the prices of the same cryptocurrencies between these two exchanges, you should find the cryptocurrencies with the price difference. It will be difficult to find price differences in all cryptocurrencies, and price differences at very small rates will be meaningless unless you have very large amounts of cash.

For cryptocurrencies that you find a significant price difference, you buy from the stock market with the low price and transfer it to the stock market with the high price. You can make a profit by selling the same cryptocurrency at a high price on the exchange you transferred. The moment you perform this transaction, it means that you have successfully completed the arbitrage transaction.

Although it is very easy to explain in this way, it is very important to be fast in arbitrage transactions. Because before the transaction is completed, there are several possibilities such as closing the price difference, the possibility of the price of the relevant crypto money falling, and if you are not fast enough, you will perform an unsuccessful transaction.

Another issue to be aware of are transfer fees and trading commissions. You may want to arbitrage based on the price difference you have caught, but it should be noted that the transfer fee you will pay when transferring crypto money from one exchange to another, or the commission rates that will be charged when buying and selling on the exchange, do not take your profits and make you lose.

Making Money by Arbitrage

Making money by arbitrage is a process that many investors want because, as we mentioned above, arbitrage is a kind of risk-free trading process. Of course, there will be unsuccessful arbitrage efforts, but since it is usually avoided with little or no profit, all investors are worth trying the arbitrage process.

If you want to arbitrage, you need to know how to calculate arbitrage. Calculating arbitrage for a single transaction is not very difficult. All you have to do is multiply the price of the cryptocurrency you bought at a high price and the amount of it, and subtract the price and amount of the cryptocurrency you sell at a low price, and the outgoing transfer and commission fees. The difference is the profit you make with arbitrage.

We mentioned that speed is a very important factor in arbitrage transactions. In cryptocurrency arbitrage transactions, it is very important to be one click faster. In addition, arbitrage for a single crypto currency may not require any software or bots, but it is very difficult for a person to arbitrage and maintain continuity for more than one crypto currency.

What is Arbitrage Bot (Arbitrage Software)?

Arbitrage bot, also known as arbitrage software, is software that automatically initiates arbitrage transactions in assets with high arbitrage rates by scanning for arbitrage differences for defined stock markets and assets.

Large investment companies have special software and monitors that monitor these arbitrage differences in normal stock markets. There are arbitrage software and arbitrage bots specially written in the cryptocurrency market. Some of these bots are made specifically for a single cryptocurrency and are launched as Bitcoin Arbitrage Bot or Bitcoin Arbitrage Software.

Frequently Asked Questions About Arbitrage

In this section, we answered the most frequently asked questions about arbitrage transactions. Frequently asked questions will be updated in direct proportion to incoming requests and questions.

Is Arbitrage Made For Cryptocurrencies Other Than Bitcoin?

Arbitrage is not unique to Bitcoin and therefore can be done for all cryptocurrencies.

What is Arbitrage Flexibility?

Arbitrage flexibility is also known as the arbitrage rate and is the price difference or price ratio of the cryptocurrency of interest between exchanges.

What are Arbitrage Types?

Arbitrage transactions; It is divided into two as indirect arbitrage and direct arbitrage. Direct arbitrage is simple arbitrage transactions between two exchanges. In indirect arbitrage transactions, at least 3 exchanges or markets must be traded.

How Does Arbitrage Occur?

Arbitrage occurs when the price difference between markets is imbalanced. Especially when volatility is high, this imbalance provides the opportunity to arbitrage with human power without any bots or software.

Can Arbitrage Tracking Sites Be Found?

It is difficult to find sites that offer the follow-up of arbitrage opportunities, or that offer this follow-up in the healthiest way possible. Instead, arbitrage software or arbitrage bots should be used.

Is It Difficult To Make An Arbitrage Bot?

In order to make an arbitrage boat, advanced software and market knowledge should be required. Otherwise, it is very difficult to make an arbitrage bot. It can be done for a fee, or a bot or software that has already been made can be purchased.

What Name Are Arbitrageers Called?

Investors who make arbitrage transactions are called arbitrageurs and are called arbitrageurs.

What is Two-Point Arbitrage?

Two-point arbitrage is an arbitrage operation made as a result of the price imbalance of a crypto currency in two different exchanges.

What is Triangular Arbitrage?

It is the arbitrage transactions made as a result of catching the arbitrage difference between the exchanges of one crypto currency compared to another crypto currency in the three-end arbitrage process. For example, you wanted to arbitrage for Bitcoin, but when the inter-exchange prices were the same, you caught and evaluated an arbitrage difference according to the ratio of the Bitcoin price to the Turkish Lira. This is a triangular arbitrage process.

You can also send your thoughts and questions about arbitrage with your comments.

Aslı Kaya Yüksel

Asli Kaya, who works as a manager inleading brands and companies in the business world; As a result of his interest in the crypto world and its markets, he has been interested in cryptocurrencies, markets and developments for a long time and transfers all his knowledge within Binansal.

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