Written by Evan Francis, CEO & co-founder of Coygo Inc. which provides tooling for professional cryptocurrency trading and insights. A cryptocurrency advocate since 2010, Evan has years of experience working as a software engineer in fintech before leaving his corporate job to pursue a full-time venture in the cryptocurrency and digital asset space.
Bitcoin and cryptocurrency arbitrage has changed a lot over the years. As more trading bots and institutions try their hand at arbitrage, so does the strategy to try and capitalize on profitable arbitrage opportunities. The big question everyone has is “are there still profits to be made?” and I’m here to tell you that the answer is a resounding yes, but you’ll need to work for it and use the right tools.
By the way, if you’re curious about how crypto arbitrage works you can learn more here: How exactly does crypto arbitrage trading work?
How Much Profit Can Be Made From Bitcoin & Crypto Arbitrage in 2020
As I’m writing this I’ve just seen a 0.36% spread (price difference) on the BTC-EUR trade pair if you were to buy on Kraken and sell on Binance, with an estimated profit of $15. Yesterday I saw a spread of 0.4% with an estimated profit of $27 on the BAT-BTC trade pair.
These are the types of spreads you can expect to find in 2020: price differences of between 0.2% and 2.5%, with estimated possible profit of between $10 and $50. Taking advantage of 10 spreads a day at an average of $15 profit would yield $150/day, or $1,050 a week.Of course sometimes a larger spread might pop up, but these are what you’ll be able to find fairly regularly.
If you’re persistent and can be quick to act on profitable opportunities, there is absolutely money to be made here. The examples I’ve given are only for spatial arbitrage (across exchanges), triangular arbitrage and other crypto arbitrage strategies offer their own advantages and profits as well. If you’re day trading crypto and the markets aren’t moving much, arbitrage can be a great tool in a crypto trader’s arsenal to turn a profit even when prices are stagnant.
Is Crypto Arbitrage Easy?
Cryptocurrency & Bitcoin arbitrage is all about speed. Spreads might only exist for a few seconds or less, so you need to be able to compare prices in real-time across exchanges. When an opportunity arises, you need to be able to configure and submit trades as quickly as possible.
For this reason, it’s near impossible to profit from crypto arbitrage in 2020 unless you’re using a tool to assist you. The same can be said about crypto day trading in general: you’ll always want the right tools to help with the job, whether they be charts or arbitrage scanners or anything else. All of the other traders are using them, so you’re at a disadvantage if you’re not.
Isn’t Transferring Between Exchanges Too Slow?
When most people first think of arbitrage they think of buying on one exchange, transferring to another exchange, then selling there. That takes too long and doesn’t guarantee a profit, so it’s really not feasible. By the time the transfer completes the price difference may no longer exist. So the type of arbitrage we’re looking at here is where you’re holding crypto on two exchanges at once and submitting accompanying orders in parallel.
For example, on the BTC-USD market you’re holding USD on Coinbase Pro and BTC on Kraken. When the price is lower on Coinbase Pro than on Kraken, you submit a buy order on Coinbase Pro to buy BTC with your USD balance, and at the same time you submit a sell order on Kraken to sell some of your BTC balance for USD. Due to the price difference, a.k.a. “spread”, you will have made a profit.
Another arbitrage strategy that doesn’t involve waiting on long transfer times is triangular arbitrage, which allows you to instantly fill a number of orders, all of which are on the same exchange, and realize a profit (if you’re fast enough).
This works by exploiting price differences between different trade pairs. For example, you could trade BTC for LTC, LTC for ETH, and ETH for BTC. In the end you’re back to your initial BTC balance, but you’ve realized a small gain due to price differences between the exchange rates. Since this all happens on one exchange, you’re not susceptible to waiting on transfer times.
Which Tools Can Help With Bitcoin & Cryptocurrency Arbitrage in 2020?
As mentioned above, you’ll really need a tool to assist with the process if you want to be successful at arbitrage. This is because you’re competing with bots and other traders who are also using tools to gain an advantage. Luckily there are a number of options available for crypto arbitrage apps that all help solve the problems encountered while arbitrage trading in their own way.
Coygo Terminal is a downloadable application for macOS, Windows and Linux that provides a number of tools for a cryptocurrency or Bitcoin trader’s workflow. For arbitrage it supports a real-time crypto arbitrage scanner that calculates and displays price differences across a number of exchanges and even calculates the estimated profit in US Dollars.
When it comes time to submit trades, Coygo Terminal’s One-Click Trading helps pre-configure your orders and allows you to submit accompanying buy and sell orders in parallel to both exchanges, so you don’t waste time configuring your orders and can act on an arbitrage opportunity as quickly as possible.
The Rapid Transfer feature also simplifies the experience of transferring between exchanges by automatically getting the deposit address, prefilling out the transfer information, and showing the estimated US Dollar value of the amount being transferred so you can easily tell if you accidentally entered the wrong amount.
Price (as of 6/2020): $17/month, $155/year
Coinigy is a web platform that allows you to view a real-time arbitrage matrix that compares prices for any pair across a large number of exchanges, over 45 according to their website. This allows you to find spreads faster than if you were to try to find them manually, and the matrix-style interface makes it easy to quickly spot the best spread.
Coinigy does support trading on some exchanges but it doesn’t do much to assist in submitting arbitrage orders so you’ll still have to manually configure your trades and submit two separate orders, which would take too long to realistically capitalize on a spread. For that reason, it’s mostly only helpful for finding spreads and not acting on them.
Price (as of 6/2020): $18.66/mo billed annually, or $223.92/year
ArbiTool offers a scanner that compares cryptocurrency prices on various exchanges to help find arbitrage spreads. It also shows some helpful information such as market depth and duration of coin transfer, although as mentioned previously the type of arbitrage where you buy, transfer, and sell isn’t really viable these days so the transfer time isn’t very practical.
ArbiTool has a transaction profitability calculator to help determine if an opportunity is really profitable after fees and such, which is important when factoring in whether or not to try and act on an opportunity. ArbiTool doesn’t currently support submitting orders so it’s sole purpose is helping to find spreads across exchanges.
Price (as of 6/2020): Varies depending on the number of users, currently $59.99/month, $539.99/year
More Opportunities Await
It’s up to you to find the best arbitrage spreads and act on them, these tools will help you along the way but you’ll still need to be the one putting in the work. There are still plenty of opportunities for those who are persistent, good luck!