How to start and grow an arbitrage trading business

We have numerous opportunities that cryptocurrency provides for Africans including cryptocurrency arbitrage trading. This business model involves buying and selling cryptocurrencies for profit using price differences from different sources. This is one of the models of crypto businesses that are not well-known by people on the continent. 

However, please note that the fact that this business model is not well known does not mean that it does not have risks associated with it. In fact, not having access to the right information and tools can lead to huge losses when carrying out arbitrage trading. 

What Is a crypto arbitrage business 

Arbitrage trading business is a type of crypto trading model whereby investors spot slight price differences of a cryptocurrency among crypto exchanges. Then they capitalize on it to make a profit. This means that crypto arbitrage trading is a process where crypto investors buy a cryptocurrency low in one exchange. Then sell it out high on another exchange. 

For example, let’s say the price of Ethereum on Bitmama is $1500 and then on Binance, the price is $1700. A crypto arbitrage trader will buy at Bitmama and sell at Binance to get a $200 profit. 

Crypto Arbitrage isn’t new in the global space. It was the secret to the early success of crypto billionaire Sam Bankman-Fried. After his success with Arbitrage trading, he went on to build one of the largest and fastest-growing crypto exchanges in the world called FTX.

How to successfully run a crypto arbitrage business

To carry out an arbitrage trade successfully, you need to have the following in mind:

1. Be on the lookout for opportunities

For you to be successful in the crypto arbitrage business, you need to learn how to be calculative and lookout for opportunities. You must learn how to buy and sell bitcoin in Nigeria at the best price as this is the first skill that an arbitrage trader needs to have to succeed. In the crypto arbitrage business, the person that discovers an opportunity immediately will likely take more profit than others that saw it late. 

2. Analyze the opportunity

Similarly to leverage in crypto trading, it is one thing to find crypto arbitrage opportunities and it is another thing to decide whether the opportunity is worth it or not. Jumping at every opportunity without checking if it is worth the time and resources will only lead to more losses than profits. You need to look at the transaction fees, network fees, and also wallet costs. Only when you have calculated the costs of these can you decide to continue to trade or lookout for another opportunity.

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3. Be time conscious

A good crypto arbitrage trader knows that time is everything in this business and so must be time-sensitive. Cryptocurrencies are volatile and the price can change at any moment, even at exchanges. So the way you make use of your time will determine if you will get profits as you trade or end up in losses. 

What do you need for a crypto arbitrage business in Nigeria?

Crypto arbitrage trading depends on so many factors for one to successfully carry it out and these factors include:

P2P exchanges

The CBN’s ban on crypto activities in banks In Nigeria, and the growth of exchange rates of foreign currencies, drive the growth of P2P exchanges in Nigeria. You need to find P2P exchanges that have favorable rates where you can buy low and sell high.

Bitmama is a good example of such a suitable P2P exchange you can buy crypto at favorable rates. We are a crypto exchange that is well-built to satisfy the needs of crypto traders and users within Africa. Bitmama enables cryptocurrencies like tether, Ethereum, and bitcoin at favorable rates, allowing you to sell at higher prices and make a profit. 

Stablecoins

Stablecoins such as USDT and BUSD are needed when carrying out crypto arbitrage business. This is because you need a stable coin after you might have made a profit to keep it safe. For instance, if you made $150 while trading Ethereum, you need a stablecoin to make sure that your profit doesn’t lose value. 

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Strategies to grow a profitable crypto arbitrage trading business

Here are some of the strategies you can make use of to make a good amount of profit while doing crypto arbitrage trading:

Basic arbitrage trading

This is one of the common arbitrage trading strategies that traders make use of every day. This simply involves the normal buying of a cryptocurrency at a low price and selling to another exchange at a high price. 

Decentralized arbitrage trading

Decentralized arbitrage trading is one of the crypto arbitrage opportunities that are common at automated market makers (AMMs) and decentralized exchanges. It makes use of smart contracts which are decentralized programs to discover the price of crypto trading pairs. 

Triangular arbitrage trading

This arbitrage trading strategy involves the trading of three cryptocurrencies in the same exchange. For instance, a trader can trade BTC, USDT, and ETH at the same time for more profit.

Statistical arbitrage trading

This is an arbitrage trading strategy that involves the use of computational, statistical, and econometric techniques to carry out arbitrage trades. Trading robots and mathematical models are the major utilities needed to carry out this type of trade. 

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Next steps 

Crypto trading of any sort must be done with care and proper risk management. The crypto arbitrage business is one of the least exploited crypto opportunities. This is because people lack knowledge on how to carry out this business successfully. 

Knowing the factors on which the crypto arbitrage business is dependent will help you position yourself very well. You need to choose the strategy that works well for you. With the right strategies and steps, you can make a lot of profit from this business model. 

If you are convinced that this business model is for you, begin your journey by downloading the Bitmama app. Download now on iOS or Android to buy crypto at the best prices