Cryptocurrencies are an important and innovative investment method with opportunities for excellent financial returns. The most popular way to earn virtual currency is to trade it by buying a coin and reselling it when its value increases, a bit like one does in the stock market.
Another method is to exchange one digital currency for another, again aiming to make a profit in the transaction.
Making a trade out of these transactions is by no means easy, but even for the less experienced, there is always some profit to be made. The important thing is to have the right approach and not to think you can become rich in a short time without making any kind of initial effort. Trading, in fact, must be performed after having built up an appropriate background of knowledge of the cryptocurrency industry and after having implemented defined strategies to maximize profit opportunities and, above all, minimize the risks of losing your hard-earned money!
The technique we will discuss in this article is called arbitrage, but what exactly does it consist of?
One of the characteristics of cryptocurrencies is that they do not have a fixed price set by the market. Thus, it is often the case that a digital currency can have different prices on different exchange platforms, with the end result that a currency bought on one platform can be resold immediately on another exchange website, earning money from the price difference.
A very simple way to earn money, isn’t it? Of course, it all sounds too simple, and in fact, there are a few things to take into account before throwing yourself headlong into arbitrage.
What are the risk factors?
First and foremost, the buying and selling commissions that platforms charge: often the profit you get from arbitrage transactions is minimal and could be completely wiped out by commissions.
Before trading, therefore, it is always a good idea to make precise calculations to understand how much of our gain will go into commissions.
Another point to consider is time. The fluctuation of crypto prices is constant and often very significant even within a few minutes.
If we have established a profitable trade, it is essential that it is executed in the shortest possible time to avoid the fluctuations occurring, blowing our profit, and possibly even causing us to lose money!
Arbitrage, like all possible forms of earning money with online trading, presents its own challenges, and before starting to practice it, it is a good idea to find out more about the subject.
The best way to arbitrage safely and reduce risk is to use automated software such as Arbisgap. Not only do these programs act quickly by completing trades at the most profitable times, but they are able to check, in real-time, the value of a single cryptocurrency across hundreds of different exchanges, something that a person, no matter how well trained, could never humanly do.
And it is precisely by using such tools that we can eliminate the risks, going for safe arbitrage with the support of artificial intelligence.