Cryptocurrency Arbitrage is buying cryptocurrencies from one exchange at a certain price and selling them on another exchange at higher price. The prices of cryptocurrencies could vary from one exchange to another because of several reasons. One of them is the fact that exchanges are not directly linked. Another is that the trading volume of a cryptocurrency can sometimes be low to an extent that makes the price not adjusted to the average on the spot.
Before I tell about my first cryptocurrency arbitrage experience, please note that I have always been skeptic when it comes to cryptocurrency arbitrage due to many factors:
1- Verifying a Transaction could take much time to transfer a cryptocurrency from one exchange to another. As a result, during that timeframe, the price of the cryptocurreny could change unpredictably in the latter exchange.
2- Sometimes getting verified in exchanges is needed to trade a large number of cryptocurrencies, which is a total hassle.
3- Always take note of the transaction volume on each exchange because this can prevent you from selling the cryptocurrency that you bought at a lower price on another exchange.
4- Be careful! buying cryptocurrencies at a lower price from an exchange that has an ill reputation is highly risky. You could end up loosing all your money. During last days of Mt. Gox, the price of bitcoin on that exchange was cheaper than its price on other exchanges.
My first arbitrage experience was amazing.
Upon the first bitcoin fork, I realized that the price of Bitcoin Cash was different in ViaBTC from Bittrex and other exchanges. I knew at the time that the difference in prices was due to the fact that verifying transactions was super slow to transfer Bitcoin Cash from one wallet to another, which affected the trading volume, prices and whatnot. The price of 1 Bitcoin Cash in ViaBTC at the time was around $150. On the other hand, the price of 1 Bitcoin Cash on Bittrex was around $900. So, I decided to risk a little bit, buy one Bitcoin Cash from ViaBTC and send it to Bittrex to see what happens. Please note that I initiated the transaction right after the fork.
It took 48 hours, if not more, to transfer my Bitcoin Cash from ViaBTC to Bittrex. By the time my Bitcoin Cash arrived to Bittrex, the price of Bitcoin Cash dropped to $400. I still made profit, so I became happy and thus decided to buy another Bitcoin Cash from ViaBTC for $200. However, by the time it got transferred to Bittrex, the price of Bitcoin Cash on Bittrex was around $150. Hence, I decided to keep the Bitcoin Cash in Bittrex without selling it. I am happy about my decision because today the price of Bitcoin Cash is $450. Yup I still made profit. And that's why, I will keep holding, not only Bitcoin Cash, but also all cryptocurrencies I own.
Long live the hodlers!
