Crypto Arbitrage: What You Need To Know In 2022

Bitcoins

The rise of crypto has been swift and impressive – changing the face of investments and impacting the way in which we think about traditional fiat transactions. As there are hundreds of exchanges out there supporting thousands of different tokens (the number of which grows seemingly every month), it’s often strange to think that the niche is still in its early stages.

The great thing about this is that there are crypto arbitrage opportunities to take advantage of and significant gains are on the horizon for those who implement this trading strategy.

What is crypto arbitrage?

Crypto arbitrage is a simple trading strategy that enables investors to make significant profits, fast. All you’ll need to do is choose a stock or cryptocurrency that appeals to you (the more popular it is, the better your efforts are likely to be), purchase it on the cheapest exchange you can find and then sell it on another for a higher price. This allows for instant profits – and as there are discrepancies in pricing across a host of markets and exchanges, it’s easy to use them to your benefit.

What you need to know about crypto arbitrage in 2022

It’s no secret that the pandemic (and consequently the rise in people wanting to make quick cash via easy crypto investments) has presented challenges for those hoping to trade successfully. With this in mind, here’s what you need to know:

  • Arbitrage is considered to be one of the lowest-risk strategies out there
  • The widest spreads could potentially make 2-3% profit per trade
  • The investment horizon is shorter
  • Opportunities are still diverse
  • Competition is low

While this may sound appealing, there are a few downsides to arbitrage that traders should keep in mind. For one, trading fees are rising, which may impact profits long term. Then there’s the fact that transaction delays and slippage can occur, and even a few seconds of wait time could see traders missing out on their window of opportunity.

It’s no secret that all trading strategies can have their pitfalls, but as arbitrage is so simple to get involved with, with little outlay, it can still be a great investment strategy for investors everywhere.

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