5 profitable ways to make money with crypto arbitraging

Crypto arbitraging is a lucrative way to make money in crypto. It involves taking advantage of price differences and fees across exchanges and cryptocurrencies and making money from the differences by buying at a low cost to sell higher.

Here are 5 proven ways to make money with cryptocurrency arbitaging.

This is the most basic and widely used arbitrage strategy. For cross-exchange arbitraging, you will be taking advantage of the price difference of crypto pairs between two exchanges. 

For example, you can buy Bitcoin on Kucoin and sell it at a higher price on Bybit. It’s that easy. However, you must be well-timed to buy and sell across both exchanges, as price differences can sometimes fill up.

For spatial arbitraging, you will focus on two countries with the same or different exchanges but essentially different prices. As a cryptocurrency arbitrager using the spatial arbitraging strategy, you will buy cryptos from an exchange in one country and sell the cryptos in another exchange with a higher price than the first country.

For example, if you live in the UK and there is a high demand for Bitcoin in the UK, which shoots the price of Bitcoin in the UK up, you can buy Bitcoin from a US exchange at a lower rate and sell it to UK citizens at a high price.

The only challenge with this method is having a verified crypto exchange between the two countries. However, if you have a friend in any of the countries, they can help you.

The triangular arbitraging strategy is tricky, but you can make more money once you grasp it. In triangular crypto arbitrage, you will be trading three different cryptocurrencies. Let’s see how it works using Binance chain (BNB), Ethereum (ETH), and Bitcoin (BTC). 

Assuming you have BNB in your crypto wallet. Then you find out you can get more BNB if you buy it with BTC on Binance. You also see that you can get more BTC if you buy it with ETH. 

How do you connect the dots? To maximize your profit, you then decide to:

1. Buy ETH with his BNB
2. Use the ETH you bought to buy BTC 
3. Use your new BTC to buy BNB again

With this strategy, you will end up with more BNB than you originally had without spending extra money. 

The advantage of this kind of crypto arbitrage strategy is that it all happens on one exchange, so you don’t need to worry about deposit withdrawal fees. Since BNB is the native token of the Binance ecosystem, you won’t pay transaction fees for its purchase on the Binance exchange. 

To understand how decentralized arbitraging works, you must first understand decentralized exchanges. There are two types of crypto exchanges: centralized and decentralized exchanges.

A centralized crypto exchange acts as a middleman between a buyer and seller and uses an order book to place buy and sell orders. In a centralized exchange, when you place a buy order of $100 BNB, your order is placed in an order book and waits to be filled by someone else’s order willing to sell that same amount of BNB at that price.

A decentralized exchange has no middleman. It connects the buyers and sellers directly, and instead of an order book, it uses an Automated Market Maker (AMM). In the case of an AMM, a liquidity pool is provided that allows for swapping one token for another.

In decentralized arbitraging, you will be taking advantage of the price difference in two liquidity pools. For example, if you notice that BNB in a BNB|BTC liquidity pool has a lower price than that in a BNB|AVAX liquidity pool, you can buy BNB from the BNB|BTC pool and swap it for BNB in the BNB/AVAX pool.

In statistical arbitrage, you will use data analytic skills to analyze price differences and trade across exchanges. It’s a bit more like trading, and in some cases, you could use crypto trading bots to snipe your entry and exit from the market. 

Since it’s automated, you can make multiple trades at once. But, this is an advanced form of crypto arbitrage trading, and experienced traders mostly use it.