Certain conditions must be met for a crypto arbitrage to occur:
- There must be an imbalance in an asst price across exchanges. Crypto arbitrage is usually done with the same assets but at different market prices.
- The two trades must be executed simultaneously on different exchanges. The token is bought on the exchange that has a lower price and at the same time sold on the exchange with the higher price.
Despite the profitability of cryptocurrency arbitrage, it is not a popular strategy. This type of trading generally lasts for only a few minutes, as the prices in the different exchanges quickly converge. Thus many traders are unable to keep up.
In order to find and take advantage of arbitrage opportunities, traders need to have access to real-time data from multiple exchanges. This data can be challenging, so many arbitrage traders use specialized software to find and execute trades automatically.
Crypto arbitrage trading software allows for real-time monitoring of all trades and seamless execution of buy and sell orders across multiple exchanges. This enables traders to capitalise on any price discrepancies between the exchanges.