What is crypto arbitrage and how does it work?

Crypto arbitrage is a popular method to potentially generate decent profits from the price difference in different cryptocurrency markets. Buying and selling crypto can be done in such a way that it will generate consistent profits. How exactly does crypto arbitrage work, and what are the different types of arbitrages traders can perform?

What are the best coins for crypto arbitrage?

XLM, XRP and NANO are a few of the coins that work best for this type of arbitrage trade. A more sophisticated approach to crypto arbitrage is to hold cryptocurrencies on two different exchanges. Whenever there is a price discrepancy, the arbitrage trader can buy crypto on one exchange and sell it on another at the same time.

What are the risks of crypto arbitrage trading?

The risks of crypto arbitrage that traders should be aware of are: Transaction fees: Most crypto exchanges make a profit off the transaction fees they charge traders. Although most traders don’t pay much attention to transaction fees, arbitrage traders can lose big chunks of their profits on these charges.

How do crypto exchanges work?

With the thinly traded forms of crypto that offer the widest spreads, a trader has to be careful not to increase the purchase price and decrease the sale price of a digital asset by their own trades. The crypto exchanges all work similarly, pricing crypto based on the last trade on that exchange.