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How to Choose a Cryptocurrency Arbitrage Trading Software?

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Yuri Musienko
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Arbitrage trading is a great way to profit from price differences for the same or related cryptocurrency assets at the same time in different markets. Traders can track the difference in rates manually, which takes time, or use special software, which is more efficient and profitable. From the article, you will learn how to choose cryptocurrency arbitrage software, what criteria you need to consider when doing this, and what options are currently available.

What is cryptocurrency arbitrage?

How to Choose a Cryptocurrency Arbitrage Trading Software

Arbitrage trading scheme. Source

Arbitrage is when a trader buys a cryptocurrency asset in one place and immediately sells it in another at a higher rate, using the price difference to make a profit. For example, if 1 BTC token on Binance sells for $ 31,660, while it costs $ 31,650 on Kraken, then you can buy 10 BTC on Kraken and sell them on Binance, which will bring you $ 100 profit (minus commissions and other costs). The main thing here is speed, since currency rates change very quickly and you need to have time to take advantage of their discrepancy.

There are two types of cryptocurrency arbitrage trading:

  • inter-exchange arbitration (classic, simple);
  • intra-exchange arbitration (triangular, complex).

Arbitration between cryptocurrency exchanges

How to Choose a Cryptocurrency Arbitrage Trading Software
Opportunity for cross-exchange cryptocurrency arbitrage

It is a simple arbitrage where you buy one asset on one exchange and sell it on another at exactly the same time. It is it that is described in the example above with the purchase of BTC tokens on Kraken and their sale on Binance. This approach is the most obvious, since it is very similar to fiat currency arbitrage on Forex and sports arbitrage, which is common for most traders.

If you plan to make money in this way, then when choosing software for cryptocurrency arbitrage, you need to remember that, in addition to the difference in rates, it should also track the commissions that need to be paid, namely, trading commissions and commissions for deposit / withdrawal of funds on exchanges. These costs can be reduced if you deposit a certain amount of currency in advance to ensure your own liquidity.

Intra-exchange cryptocurrency arbitrage

How to Choose a Cryptocurrency Arbitrage Trading Software

The simplest scheme of intra-exchange arbitrage. Source

This option for cryptocurrency arbitrage involves buying one asset, transferring it to another, which is then transferred back to the first asset. In the presence of inefficiency in the market, such an operation can bring a small profit, which can be increased by repeating all iterations several times, while there is still an opportunity for arbitrage (this is already polygonal arbitrage of cryptocurrencies).

This approach is more complicated, since here you need to link the rates of several assets at once and at the same time take into account the probability of a decrease in profitability with each next polygonal cycle. This means that traders should be careful and take their time to correctly measure risk/income.

However, if a trader stays within the same cryptocurrency exchange and applies the same polygonal approach over and over again to different cryptocurrencies, the need to pay fees for cryptocurrency deposit / withdrawal is eliminated.

How to choose cryptocurrency arbitrage software?

Now, when we have described what cryptocurrency arbitrage is and what it can be, we can move on to the criteria that users need to pay attention to when choosing arbitration software. In addition, it will not be superfluous to describe several such programs that are popular with traders.

Criteria to be considered

Safety of funds. In order to trade on your behalf on cryptocurrency exchanges, the software (bot) will need your keys to cryptocurrency wallets and / or keys to accounts on exchanges. If this data falls into the hands of intruders, your funds will simply disappear and you are unlikely to be able to get them back. Here's how to avoid it when choosing cryptocurrency arbitration software:
  • Do not use applications from unknown developers or those with reputation issues. In this case, you need to pay attention not only to the integrity of the company, but also to the quality of their software, since errors in the code can also cause leakage of business data.
  • Before transferring keys, logins and passwords to the arbitration bot, disable the withdrawal function without your consent.
  • It’s better to use open-source software.
Integration with exchanges. Good cryptocurrency arbitrage software should have integration with major cryptocurrency exchanges. And the more, the better, as this increases the likelihood of discovering conditions for arbitrage transactions. So, the Bitsgap bot is associated with platforms such as Binance, Coinbase Pro, Kraken and Bitfinex; Blackbird bot - OKCoin, Bitstamp, Exchange, Gemini and Kraken; HaasBot bot - with 20 exchanges like Coinbase, Huobi and KuCoin; Cryptohopper - 12 exchanges including HitBTC, Bittrex and Bitfinex.

Price, fees and commissions. The cost of software and transactions is another important criterion to consider when choosing software for cryptocurrency arbitrage. Therefore, try to find an application that will not charge you too much for downloading and using the arbitration functionality.

Here's how much you need to pay for using such software:

  • Arbitrage functionality is available to users with Advanced ($ 44 / month) and Pro ($ 110 / month) subscriptions).
  • Users of this arbitration bot must pay between 0.006 and 0.015 bitcoins for three months (there are discounts for semi-annual and annual plans). The more you pay, the more features will be available.
  • In this service, arbitrage is available for the Adventurer ($ 49 / month) and Hero ($ 99 / month) subscriptions).
Ease of use. Cryptocurrency arbitrage software can be targeted at beginners and professional traders. The difference is in the complexity of the training, the available functions and the number of automated processes. In addition, to work with some services, for example Blackbird Bitcoin Arbitrage, a trader will also need some programming skills in order to customize software and / or trading strategies to suit his needs.

Application community. Even when choosing software for cryptocurrency arbitrage, one should not forget about the people who use it or have used it in the past. First, their number usually indicates the quality and reliability of the application. But, you need to understand that the size of such communities is measured not in millions, but in several thousand. For example, the Bitsgap channel on Telegram has 2,100 subscribers, while Cryptohopper on Facebook has 5,000 subscribers. Secondly, the community can help if you have problems with the software.

Software / connection speed. Usually, the difference in the price of the same asset on different exchanges persists for several seconds or even fractions of a second. Therefore, the arbitrage software must be fast enough to find such a difference and manage to carry out the necessary transactions. In addition, you also need to remember about other traders (bots) who can find the exchange rate difference and conduct arbitrage operations faster, which will eliminate this exchange rate difference and deprive you of the opportunity to earn.

Why speed is so important is well documented in:

  • Flash Boys: A Wall Street Revolt;
  • The Hummingbird Project movie.
Update frequency. The cryptocurrency market is a very dynamic industry, where the code of blockchains, exchanges, wallets, smart contracts, APIs are updated very quickly, and therefore arbitrage bots must also be updated frequently to keep up with all these changes. Otherwise, the bot may simply become incompatible with the API of the exchanges, show incorrect data on the rate and commissions, or become insecure (vulnerable to hacking by hackers).

Program scanners for arbitration

How to Choose a Cryptocurrency Arbitrage Trading Software
Interface of cryptocurrency arbitrage scanner Cryptolume. Source

It is an automated arbitrage software that scans rates on various exchanges to find the lowest and highest price of an asset and offer it to the trader. Such applications do not conduct trades themselves, they only look for opportunities for arbitration and notify about this by a message on the application screen, email, SMS or push notification.

Usually scanners are simpler and cheaper than automated arbitrage bots. Here are some examples of such programs: CryptoShock, Daytradingschool, Arbitrageex, Algotrading, Cryptolume.

Program-bots for arbitration

How to Choose a Cryptocurrency Arbitrage Trading Software

Interface of Bitsgap cryptocurrency arbitrage bot. Source

Earning on the difference in cryptocurrency rates on different exchanges can be automated. For this, traders use special programs - robots, or bots. Here are some popular examples of such automated cryptocurrency arbitrage programs.

Bitsgap. A cross-exchange platform that allows you to connect several popular cryptocurrency exchanges into one interface, including exchanges such as Binance, Bitfinex, Kraken, Bitstamp and others. The platform has been operating since 2018 and has become a leader in the field of arbitrage trading, since its bot is integrated with 25 leading platforms and allows you to trade more than 1000 currency pairs.

The bot charts are created using TradingView, which gives traders accurate information about the current state of the cryptocurrency market in real time at any time. To arbitrate trading with Bitsgap, you need to deposit funds on the selected exchange before adding it to your dashboard to track arbitrage opportunities and conduct the appropriate automated transactions.

How to Choose a Cryptocurrency Arbitrage Trading Software

Cryptohopper. The project is registered in the Netherlands and has established itself as one of the most reliable and efficient arbitrage trading bots. It has one of the most user-friendly interfaces and integration with most exchanges, which creates excellent opportunities for arbitrage (and other trading operations).

At the same time, Cryptohopper works not only with cross-exchange trading, but also offers a complex triangular arbitrage that will help you make money on the price difference between several pairs on the same exchange. In addition, the project has a responsive community where professional traders share successful trading templates to help beginners take their first steps.

How to Choose a Cryptocurrency Arbitrage Trading Software

HaasBot. The bot was created by HaasOnline in 2014 and functions as an automated trading service that allows you to trade multiple digital assets. The platform provides traders with a set of tools that includes several customizable bots, indicators and other advanced features designed for both beginners and experienced traders.

HaasBot gains access to your wallet and account and gives you the ability to set all the necessary parameters for arbitrage trading (buy / sell limits, etc.). The service supports both cross-exchange and triangular arbitrage of cryptocurrencies. You need to deposit funds on stock exchange deposits.

How to Choose a Cryptocurrency Arbitrage Trading Software

Blackbird. The service is geared towards Bitcoin and its arbitrage trading capabilities. The trading platform operates in the C ++ programming language and provides ample opportunities for automatic long and short arbitrage between exchanges. The main advantage of the Blackbird project is the ability to implement a market-neutral strategy that makes your estimated incomes immune to exchange rate fluctuations in the bitcoin market.

At the same time, this cryptocurrency arbitrage software does not require the transfer of funds between bitcoin exchanges, since trading operations are carried out in parallel on two separate exchanges at the same time. This way, you don't have to deal with slow transactions and other types of delays that have pursued the Bitcoin network for many years.

How to Choose a Cryptocurrency Arbitrage Trading Software

ArbiSmart. An EU regulated cryptocurrency arbitrage platform that uses a sophisticated trading algorithm that finds the lowest price to buy an asset and an appropriate platform where you can sell for the maximum profit. The developer claims that its algorithm combines speed and reliability with transparency and security at the blockchain level.

How to Choose a Cryptocurrency Arbitrage Trading Software

How to Choose a Cryptocurrency Arbitrage Trading Software? key takeaways:
  1. What is cryptocurrency arbitrage?
  2. Arbitration between cryptocurrency exchanges
  3. Intra-exchange cryptocurrency arbitrage
  4. How to choose cryptocurrency arbitrage software?
  5. Criteria to be considered
  6. Program scanners for arbitration
  7. Program-bots for arbitration
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