Despite having so many detractors who have maligned the many opportunities churned out by the cryptocurrency market and its potential to grow into something bigger in the future, the crypto world continues to offer more business opportunities for investors who care to harness them.
The good news is that Africans, especially Ghanaians are not sleeping on the prospects of this ingenious financial innovation.
Over time, there have been many proven ways of making money with cryptocurrencies such as crypto staking, crypto lending, yield farming and crypto arbitrage trading.
Cryptocurrency arbitrage is a good crypto business model that can generate extra cool cash if properly utilised.
This business model is not quite popular in Ghana but a good number of crypto billionaires can credit their fortunes to this business model. A good example is billionaire Sam Bankman-Fried whose early success in the crypto world can be dedicated to the cryptocurrency arbitrage business.
Given that cryptocurrency arbitrage is a business model, it is not immune to risks. In the absence of information and tools, one will surely reap huge losses instead of profits from crypto arbitrage.
However, with the right trading policies, skills and experience, one can engage in a profitable cryptocurrency arbitrage business and make more money.
In this article, we will discuss what crypto arbitrage business is all about and the strategies you need to start a profitable crypto arbitrage business in Ghana.
What Is Cryptocurrency Arbitrage Business?
The Crypto arbitrage business is a type of cryptocurrency trading model whereby traders trade a cryptocurrency on different crypto exchanges while leveraging on their price differences on each exchange.
That is to say that in crypto arbitrage trading, investors capitalize on the slight price differences of a cryptocurrency on two different exchanges to make profits.
They buy a cryptocurrency at a lower price in one exchange and sell it a bit higher on another exchange.
For example, if the price of Bitcoin on Binance is $20,250 and the same Bitcoin is listed at $20,245 on the Coinbase exchange, an investor who practices a crypto arbitrage trading model will buy Bitcoin at Coinbase and sell at Binance to make a $5 profit.
What You Need To Start A Crypto Arbitrage Business In Ghana
If you are looking to engage in this type of crypto trading model, you’ll need these two basic things listed below;
1. P2P Exchanges:
The growth of P2P exchange platforms in Ghana is a result of the bad performance of the cedis against the dollar which resulted in high exchange rates.
The exchange rates on some P2P exchanges are quite high, so it will be in your best interest to look out for P2P platforms with favourable rates that can enable you to buy low and sell high. A good example of a P2P crypto exchange in Ghana is Binance P2P.
2. Stable Coins:
Stablecoins are cryptocurrencies that are pegged to the dollar such that they have the same value as fiat money and they are commonly used to hedge against inflation.
While engaging in a crypto arbitrage business model, there’s a need to save the profits as stable coins instead of leaving them as crypto or fiat money.
By converting to stablecoins, your profit does not lose value to inflation.
Some Profitable Crypto Arbitrage Trading Strategies
While attempting crypto arbitrage trading, using these strategies will help you reap a good amount of profit from your trade.
1. Normal Arbitrage Trading:
Just like the name implies, it’s the ‘normal’ buying at a low price and selling at a higher price of a cryptocurrency on two different platforms.
2. Statistical Arbitrage Trading:
This type of crypto arbitrage trading requires a lot of statistical and econometric methods. It is nothing like normal arbitrage trading because mathematical models and trading robots are mainly utilized to carry out this type of trade.
3. Triangular Arbitrage Trading:
Just like a triangle has three sides, this type of arbitrage trading involves the trading of three different cryptocurrencies on the same exchange, at the same time for more profit.
For example, a trader can trade BTC, DOGE and ETH simultaneously.
4. Decentralised Arbitrage Trading:
This type of arbitrage trading is most common at automated market makers (AMMs) and decentralised exchanges (DEXs).
It discovers the price of crypto trading pairs using decentralized smart contracts.
How To Run A Profitable Crypto Arbitrage Business
Do you wish to start crypto arbitrage trading? You must understand the following tips to be able to start a profitable crypto arbitrage in Ghana.
1. Identify Opportunities:
The first rule of thumb you need to understand is that in crypto arbitrage trading, the trader who identifies an opportunity shortly before everyone else will likely take more profit than others that identified it later.
Therefore, the secret of becoming a successful arbitrage trader and making profits from arbitrage trading is being able to look out and identify opportunities.
Also, be very calculative and know the best price to buy and sell the crypto.
2. Evaluate The Opportunity:
Do not make the mistake of jumping into everything that looks like an opportunity because not all opportunities are worth jumping into.
When a trader understands that identifying opportunities is one thing but not every opportunity is a profitable one, It becomes crucial thing to examine every opportunity to know if it’s worth spending time and resources on.
You can only decide to continue the trade or source for opportunities when you have considered some costs like network fees, transaction fees and wallet costs.
3. Be Time Conscious:
Most importantly, be time conscious because time is your best friend and biggest enemy in this business model.
Given that cryptocurrencies are very volatile such that their prices can change in seconds, a good arbitrage should know how best to manage time.
Therefore, the level of profit or loss you may incur in this treating model depends on how efficiently you use your time.
Crypto arbitrage trading is a very good business model which if properly utilized, can make one very wealthy but this must be done with a good risk management strategy.
Among all the many opportunities for earning money from cryptocurrency, this crypto arbitrage trading model has least been explored and utilized.
The reason for this is not far-fetched because many people do not have an idea of this business model and do not know how to start this business successfully.
However, since you have read about the basic requirements of crypto arbitrage trading and some factors that will determine how profitable the business can be, you can start by placing yourself in a safe position, and choosing the best strategy for yourself.