The crypto industry has no shortage of ways for people to make money, apart from trading and investment. One process that is increasingly becoming popular and viable among crypto enthusiasts is crypto arbitrage. 

In its simplest form, arbitrage is the process of buying a stock on one market and selling it on another to take advantage of price listing differences across various markets.

Example, a stock was priced at $50 on the SSE but it was trades at $50.30 on the NYSE. A trader goes ahead to purchase these shares on the SSE and sells them on the NYSE to make a 30-cent profit on each share. 

That is the basics of arbitrage trading and crypto arbitrage works similarly to arbitrage trading on the traditional stock market. Stock market traders seek to make gains by buying and selling across markets and in the same vein, crypto arbitrage traders look to profit from the varying list prices on different exchanges.

Practically, a crypto investor purchases 100 Avalanche tokens (AXAX) on Binance at $14 per coin and sells them on Bitmama for $14.10. This means that the investors made 10 cents profit per token just by trading them on a new platform.

One of the common types of crypto arbitrage trading is spatial arbitrage, also known as geographical arbitrage. It is when an investor simply buys cryptocurrency on one exchange, sells in another, and collects the profit. This is usually done by taking advantage of an exchange’s technical inefficiencies such as pricing delays and listing differences.

There are quite a lot of advantages to arbitraging cryptocurrencies. It is a low-risk investment because traders hedge their losses with a counter-investment. Also, crypto arbitrage has the potential for quick returns. The nature of currency conversions at a desirable rate also means that profits can be realised in a matter of minutes.

Additionally, crypto arbitrage works during bull and bear markets. This means that arbitrage opportunities abound whether the market is rising or falling.

However, it is not easy knowing how to spot the opportunities. In view of this, we have come up with a list of 3 ways to identify crypto arbitrage opportunities.

Check the market for price changes 

To spot a lucrative crypto arbitrage opportunity, investors must browse the market for price movements. Comparing the prices of cryptocurrencies on different platforms is essential to know where to buy and sell. 

Here is a list of some special software that can help investors scrape this data from various exchanges to highlight potential opportunities.

Keep track of the fiat rate 

Another way to take advantage of crypto arbitrage is to track the exchange rate of fiat currencies like USDT to naira on different exchanges. 

There is usually a varying degree of exchange rate from Paxful marketplace to Binance peer to peer, to Bitmama’s naira conversion to USDT. Identifying these differences across centralised and decentralised exchanges can accrue a significant amount of profits.

Trading pairs

This is a bit technical and it is usually for the most skilled crypto traders. Trading pairs help gauge the comparative value of two cryptocurrencies or between a coin and a fiat currency. I.e, an exchange might show that one Dogecoin token is worth a certain amount of Shib and the others.

Cryptocurrencies with high volatility are however most suitable because they open more opportunities for arbitration.