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Bitcoin arbitrage

Recently, there hgas been a significant increase in the interest in crypto currency, although we are witnessing the sharp ups and downs of bitcoin. The Internet contains a huge number of opinions about the further life of this digital currency, among them there are opinions that this is another bubble, as well as views on multiple growth. In this regard, there is a large number of questions, which have the same essence: how with a minimum risk to profit from such sharp fluctuations? In order for the answer to these questions to be positive, it is necessary to use arbitrage strategies.

So what is arbitrage? The basic principle of such strategies is to take advantage of the price difference for the same asset, which is traded in several markets. In the event that on an exchange the price of an asset increases in contrast to the price of an asset to another, an arbitrage transaction is carried out (on the first exchange, the asset is sold and the other is bought). When the prices are leveled, the reverse operation is performed. And so the trader receives a guaranteed profit, which does not depend on the situation on the market.

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As for bitcoins, there are several ways to use such a highly profitable strategy. Now we know the two most popular worldwide bitcoins exchanges: MTGox (Japan) and BTC-e. Both of them are undoubted competitors, but it should be noted that the difference in their bitcoin rates can reach 10-20%. At MTXX, the price of bitcoins is usually higher than the price on the BTC-e exchange. How can you make a profit with so much difference in prices? Elementary, you can buy bitcoins on the BTC-e exchange, and then transfer them to MTGox and sell them there. But this method is not so profitable, because the costs that appear during the physical transfer of bitcoins between different exchanges are only compensated by the potential benefit, not bringing a special profit.

Of course, there is a more profitable way of using the difference in prices – statistical bitcoin arbitrage. This strategy trades not physical bitcoins, but CFD-contracts for them. According to this method, during a large price difference, the physical delivery of goods from one stock exchange to another can be replaced: simultaneously sell the CFD-contract of the MTGox exchange rate and buy such a contract of the BTC-e exchange rate. When the price leveling begins, you close the open positions and receive guaranteed earnings. To date, some brokers sell CFD contracts at the price of the bitcoin exchange rate on MTGox or at the price of the bitcoin exchange rate on the BTC-e exchange. On the BTC-e exchange, you can trade contracts using the MetaTrader 4 terminal.

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Now, probably, there is no exchange instrument with the same great price difference on various exchanges, because the difference in prices on bitcoin-exchanges is a rather overwhelming situation. Thanks to this, the potential income of arbitrage strategies is surprisingly high. Of course, in order to implement this strategy – to carry out simultaneous trading on different bitcoin-exchanges, you need to have special software. For example, the trading robot Megatrader (megatrader.org). It provides the opportunity to work simultaneously with different trading terminals, as well as the construction of any complex arbitrage strategies.

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