The fact that each Bitcoin exchange shows a different price for Bitcoin has given birth to the arbitrage phenomena. In this post I’ll explain exactly what arbitrage is and how it is conducted.
A Simplified Example of Arbitraging Bitcoin
Let’s take a simple arbitrage example in order to illustrate how arbitrage is done. At the time of writing, the price of Bitcoin on binance is $7000 while the price of Bitcoin on bituary.net is $7,400.
The difference between prices is $400, and this is quite a decent opportunity for arbitraging. Let’s say, you buy 100 bitcoins on binance at the rate of $7000 each, and subsequently you sell them on bituary.net at the rate of $7,400 each.
In a perfect world you’d make $400 per Bitcoin.
Let’s get down to the math:
Number of Bitcoins bought in binance — 100
Price of each Bitcoin — $7000
Total expenses — $7000 * 100 — $700000
Number of Bitcoins sold on bituary.net — 100
Price of each Bitcoin — $7,400
Total revenue — $7,400 * 100 = $740000
Total profit — $740000 — $700000 = $40000
An interesting thing to notice from the example above is that we need a relatively large amount of capital in order to make a substantial profit via arbitrage. However, in real life things are more complicated than the simplified example above.
let’s take an example of arbitrage between the exchanges binance.com and bituary.net
We buy 1 btc on binance at a price of 6,626 usdt We transfer btc to bituary.net exchange We sell 1 btc on bituary.net at the price of 7,044 usdt Let’s calculate our profit: 7,044 usdt — 6,626 usdt = 418 usdt our profit
What is usdt ?
Tether (USDT) is a popular stable coin which is tied to the US Dollar at a 1:1 exchange ratio.
Is Arbitrage Illegal?
Arbitrage is completely legal as the only thing that is being done is exploiting price gaps between exchanges. A person conducting arbitrage is just buying and selling as any other trader would do.
Where is it more profitable to buy bitcoin and sell?
At the time of 11/25/2019, the best offer for buying bitcoin on the binance exchange (price 6,626 usdt) For sale bituary.net exchange (7,044 usdt)
Why is the btc price on bituary.net exchange so high?
It was UK isolated for long time, now it’s worldwide working, so demand is really high on there
Is kyc required to start arbitrage?
binance limit 2 btc for withdrawl without kyc
bituary.net also limit 2 btc for witdrawl without kyc