The Role of Trading Bots in Modern Crypto Arbitrage

The Role of Trading Bots in Modern Crypto Arbitrage

If you have any intimate relationship with cryptocurrencies or traditional trading methods, it’s safe to assume that you are familiar with the concept of arbitrage trading.

In simple terms, arbitrage trading is a strategy aimed at exploiting price discrepancies between different exchanges. Although prices should be consistent across exchanges all the time, this is usually not the case due to different trading hours, volumes, and technical glitches.

In other words, arbitrage traders wish to buy an asset at a lower price on one exchange while selling it for a higher price on a different exchange.

Arbitrage trading's roots go back to traditional markets in the early 1980s and is considered by many to be the first form of automated trading. However, it is arguably more suited for the decentralized nature of the crypto world, which, for obvious reasons, presents more potential opportunities to capitalize on.

The most notable success story of arbitrage trading in the crypto market and possibly even the traditional markets is that of the notorious Sam Bankman-Fried. He made his fortune using price differences between the price of BTC in the US and Japanese crypto exchanges. Famous success stories aside, there are many other reasons why many crypto traders view arbitrage trading as one of their favorite investment schemes.

As we briefly mentioned, arbitrage trading is one of the easiest concepts to trade, especially when utilizing a designated trading bot. There is no need for technical analysis or projections about the future direction of markets.

To trade arbitrages successfully, traders need to focus on very liquid assets. This means assets with high trading volumes, which should, in turn, cause smaller spreads. Then, traders only have to figure out which assets tend to display different prices on different exchanges and prepare a workflow accordingly.

Tools that automate crypto trading, like arbitrage bots and crypto trading bots, can simultaneously scan and monitor the price action of numerous assets across numerous exchanges and act upon this data instantly. This enables traders to outsource almost all the heavy lifting usually associated with this type of trading. By adopting a disciplined digital assistant as a reliable crypto bot to manage the arbitrage strategy, traders can save time and reap more satisfying results.

This is why many crypto experts, relatively speaking, consider arbitrage trading to be one of the less risky methods to exploit the inherent inefficiencies of crypto exchanges specifically and the crypto market as a whole. While in the past this concept might have been easy to understand but hard to implement, the surge of affordable and reliable automated trading tools that can fully automate the execution process presents traders with a very promising potential to generate a relatively steady stream of passive income. In summary, arbitrage trading can be a good addition to any trader’s portfolio. It is one of the only trading methods that can be profitable almost all the time because it isn’t dependent or limited to any kind of market conditions for its success. So, what are you waiting for? Start your arbitrage journey today by exploring everything a trading bot can do for you and take your trading skills and bottom lines to the next level.