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Arbitrage trading has always been a great way for traders to profit from the price differentials for the same or related assets at the same time in different markets. With the popularity of cryptocurrencies at its peak, crypto arbitrage trading has become a viable option for many traders and investors.
In Crypto arbitrage trading, the traders capitalize on the slight price discrepancies of cryptocurrencies across multiple exchanges and markets. In other words, crypto arbitrage trading is the process of purchasing one digital asset on one exchange and selling it simultaneously on another where a higher price is available.
This process is making profits through a process that involves very minimal risks. This is why a number of crypto arbitrage platforms have emerged. But choosing the right crypto arbitrage platform is another thing altogether. Let’s look at some of the factors that are necessary to consider when choosing crypto arbitrage platforms.
Fund safety
The cryptocurrency arbitrage software needs the trader’s cryptocurrency wallet keys or account credentials to trade on their behalf. However, this also means that traders’ funds are at risk if it falls into the hands of intruders. To avoid this from happening, traders and investors should never trust applications from unknown developers or those with reputation issues. They should pay more emphasis on the quality of the software they are choosing. It’s preferred that they choose open-source arbitrage software for transparency.
User-friendly software
Cryptocurrency arbitrage software can either be beginner friendly or directed towards professional traders. The main difference between the two is in the number of automated processes available, the available functions and the complexity of the training. Depending on the skill levels of the traders and investors in question, there are several types of arbitrage platforms available. While some need programming skills to use certain platforms, others do not require any prior coding or programming knowledge.
Integrated with exchanges
The ideal cryptocurrency arbitrage software should be well-integrated with major cryptocurrency exchanges. The more exchanges are integrated, the better the chances are of discovering conditions for arbitrage transactions.
Size of community
When choosing cryptocurrency arbitrage software, investors shouldn’t discount the people who use it or have used it in the past. This usually indicates the quality and reliability of an application. However, the sizes of these communities are not necessarily in millions but in thousands.
Software and connection speed
The difference in the price of the same asset on different markets or exchanges persists for very little time – sometimes even seconds or fractions of a second. To take full advantage of the arbitrage process, the software must be fast enough to find such differences and carry out the necessary transactions. Traders and investors should also consider the other traders (bots) who can find the exchange rate differentials faster, thus conducting arbitrage operations faster than them. This eliminates the exchange rate difference and deprives them of the opportunity to earn.
Rate of updates
The cryptocurrency market is fast-paced which means codes of blockchains, exchanges, smart contracts, wallets and APIs are updated very quickly. Arbitrage software programs are thus required to be updated frequently to keep up with these changes. Failure to do this may result in the arbitrage software becoming incompatible with the API. This can produce incorrect data on the rate and commissions which doesn’t solve the purpose.
Conclusion
The number of crypto arbitrage platforms has grown over the last few years, targeted towards both beginner and veteran traders. The above considerations will assist the selection process of the arbitrage platform for any type of trader, no matter what skill level they have.
Must Read: Factors to consider when choosing an exchange
*Cordly.io does not offer financial advice, sell any financial products, or encourage to invest in specific assets or instruments.*