That’s right, arbitrage trading is still a thing. Even though trading the Kimchi premium is almost impossible now, you can still make money by using the right tools. Here is a list of the top 5 crypto arbitrage bot platforms.
Everyone’s looking for the latest and greatest trading strategy. People analyze Elliot waves, compare RSI figures to figure out the lows, and even throw themselves into the dazzling yet oh so difficult Ichimoku clouds to find a trading edge. But why not stick to the basics?
Arbitrage trading is a simple yet effective strategy that follows the most rudimentary trading rule: buy low and sell high.
Yet, the strategy is often forgotten as more complex strategies tend to foolishly attract new market participants.
To tell you the truth, arbitrage trading can be as difficult as any other strategy — when done manually. But if automate your arbitrage trading activities, you’ll find out that there’s no better way to trade the crypto market.
This article provides you with a short yet sweet overview of the market’s top 5 crypto arbitrage bots. But before I show you the best platforms, let me first explain how arbitrage trading works in the first place.
What is Crypto Arbitrage Trading?
Arbitrage trading is a strategy in which traders hunt price discrepancies for a trading pair between two or more exchanges.
Arbitrage opportunities offer miniscule profits. However, these miniscule profits can turn into a sizeable reward by repeatedly trading arbitrage opportunities.
Arbitrage trading is heavily prevalent in traditional financial markets where investors can find assets, commodities, and currencies at different prices on different stock exchanges.
Arbitrage opportunities do not last long because the arbitrage traders themselves act as the mechanism of removing price discrepancies and bringing a more universal pricing to assets.
Arbitrage opportunities in crypto are commonly found during periods of high volatility. For example, the 2017 bull run at its height offered many opportunities for arbitrage trading. While hitting all-time highs in December, investors could find Bitcoin at the following prices:
Opportunists could profit up to 4.7% per trade by buying Bitcoin on Bitstamp and selling on BitMEX. Even if the profit was only 2%, traders could still repeat 10 such trades and turn $1,000 into $1,218 during Bitcoin’s most volatile period.
Right now as you’re reading this post, Bitcoin’s price spread on exchanges ranges between 0.15% and 0.3%. It might not be much, but with the right tool, you can automate arbitrage trades and execute hundreds of such trades.
Kimchi Premium: Arbitrage Trading Redefined
The Kimchi Premium is another example of arbitrage trading done right. The premium is a market phenomenon that exists as a result of South Korea’s tight financial regulations. Foreigners cannot trade on Korean crypto exchanges due to laws that limit the ability to move money in and out of the country.
The regulatory environment led to crypto exchanges in Korea selling Bitcoin for a premium — mainly due to high demand. Traders willing to exploit this arbitrage opportunity can buy BTC on international exchanges and sell it on Korean exchanges.
And the premium is no joke either. A paper shows that Korean Bitcoin was on average 4.73% more expensive than the one sold in the U.S. for a period of two years. Moreover, the premium has reached levels as high as 63% during certain market periods.
But then again, profiting off the Kimchi Premium is no easy task. Restrictive regulations result in high transaction delays. The arbitrage opportunity you’re hunting down might be gone by the moment your funds reach a Korean exchange.
Not to mention, you have to be a citizen of South Korea to trade on Korean exchanges in the first place. And even if you do make money, taxation and transfer costs will eat up a portion of your profits.
Types of Arbitrage Trades
While arbitrage trading boils down to buy for one price and selling for an even better one, there are still many types of arbitrage trades. The following section explains how the three most popular types work.
Cross-exchange arbitrage is the OG arbitrage technique. This strategy works by buying a cryptocurrency on one exchange and selling it on a different exchange. The goal here is to buy low and sell high.
This strategy is limited by factors such as withdrawal times and withdrawal limits. An arbitrage opportunity might be gone by the time you transfer assets from one exchange to another.
There’s also the chance that the exchange might limit the number of coins you can move, severely impacting your profitability.
Spread arbitrage focuses on trading the bid-ask spread of an asset’s order book. Low liquidity leads to large spreads between bid and asks (buy and sell orders). Traders can trade these spreads and profit from the price difference.
Decentralized exchanges (DEXs) don’t have market makers (MMs) who regulate the prices of trading pairs and liquidity pools.
Most DEXs incentivize arbitrage traders to trade the price difference between LPs until the arbitrage opportunity no longer exists, and the price is aligned with the asset’s CEX price.
Traders can utilize smart contracts to spot arbitrage opportunities. This also makes it possible to program bots who scan on-chain activity and conduct arbitrage trades. And since DEXs are non-custodial solutions, traders don’t face withdrawal times (except on-chain ones).
Are Crypto Trading Bots Profitable?
Crypto bots can be very profitable. Their customizability makes it easier to profit from automated trading as it allows you to experiment with strategies and optimize them.
You can always adjust the parameters under which a bot trades. And if a bot isn’t profitable, you can backtest other strategies to analyze their performance before attempting another automation.
Keep in mind that you’ll need to do your fair share of learning of how these bots work before you can maximize your earnings. Thankfully, most of the platforms mentioned below have plenty of educational resources.
Top 5 Crypto Arbitrage Bot Platforms
The following section features the top 5 crypto arbitrage bot platforms in 2022. Keep in mind that the platforms aren’t ordered in any particular fashion. I suggest trying out and reading about each platform before risking real money.
HaasOnline represents one of the oldest automated trading platforms in the crypto world. Launched in 2014, the crypto bot platform allows you to code your own trading algorithms while also providing you with access to premade bots — one of which includes an arbitrage bot.
The Inter-Exchange Arbitrage Bot is HaasOnline’s featured crypto trading bot for arbitrage trading. The bot works by buying a cryptocurrency for a lower price on one exchange, and selling it for a higher price on another exchange.
All you have to do is select a coin and pick a trading pair on two exchanges. The bot will monitor the two trading pair and immediately execute a trade once it spots an arbitrage opportunity.
Keep in mind that for the bot to work, you must have accounts on both exchanges. The two exchanges must also have the same trading pair.
You’ll notice that there’s an obvious disadvantage to this strategy: you can only monitor two markets. However, the good thing about HaasOnline’s bot is that it’s easy to set up and manage.
CryptoHopper is a licensed automated trading bot platform that offers an intuitive and beginner-friendly user interface. Besides a great UI, the platform also offers a great arbitrage bot.
The platform has a Bitcoin arbitrage which you can use to profit from different trading pairs on the same exchange. For example, you can trade the price difference between BTC/USDT and BTC/BUSD. This allows you to arbitrage trade without having to transfer assets between exchanges.
If that’s not for you, you can still use a traditional arbitrage bot and trade the price difference of a trading pair on multiple exchanges.
And if arbitrage trading isn’t for you, you can still make use of Cryptohopper. The platform hosts a marketplace where traders share successful trading algorithms which you can buy and utilize. You also have other options to choose from, such as market making bots, DCA bots, etc.
However, a major con that throws most people off is the pricing. Expect to pay a lot of if you want to use Cryptohopper’s best features.
Pionex is a free crypto bot trading platform that offers automated strategies. You can trade hundreds of cryptocurrencies and automate your trades without having any prior experience.
Pionex has a dedicated crypto arbitrage bot that allows you to trade the price difference between two exchanges. The exchange has enough liquidity to supply smaller traders, and it has many types of bots. Some of the most popular Pionex bots include: arbitrage, grid trading, copy trading, spot-futures arbitrage, DCA, rebalancing bot, etc.
The most notable part about Pionex is that it is free. You don’t have to pay a subscription, all you have to do is pay trade fees. However, Pionex leaves much to be desired when it comes to bot customizability. Being an exchange foremost, the bots are not feature-rich compared to other platforms.
Quadency offers a robust and unified automated trading experience. It lets you trade cryptocurrency and manage bots all from one trading terminal. You can trade more than 1500 assets on some of the most popular crypto exchanges.
Quadency offers one of the most popular Bitcoin arbitrage bots on the crypto market. But besides arbitrage, you also have access to DCA, smart order, rebalance, market maker, and other bots.
The platform’s bots are absolutely beginner friendly and require little to no trading experience. And if you’re a coder with tons of experience, you can build and launch your very own Python bot via Quadency.
Another great thing about Quadency is that it allows you to fully backtest your automated strategies before deploying real capital on the market. Backtesting lets you compare a strategy against historical market data and see how it would have performed in the past. If the strategy has been profitable in the past, there’s the chance that it will be profitable in the future too.
What I personally love about Quadency is that it features many bots that trade based on indicators. You can setup bots that trade according to MACD, RSI, and Bollinger bands.
Bitsgap represents one of the most popular crypto trading bots among arbitrage enthusiasts. This beginner-friendly automated trading platform supports more than 25 crypto exchanges and features an intuitive platform that’s secure, easy, and fast.
Their arbitrage bot works by selecting a trading pair and two exchanges. Once the bot spots an arbitrage opportunity, it will buy the token at a lower price, transfer it to the second exchange, and sell it at a higher price.
You can also decide how much of your portfolio to dedicate towards this strategy. And once the bot completes a trade, it will rebalance your portfolio so that you don’t lose money.
Besides arbitrage, Bitsgap also offers grid bots, scalping bots, smart order bots, futures bots, etc. The platform is fairly cheap. However, there is no mobile app that you can use to remotely check your bot’s performance.
Shrimpy is an automated portfolio management platform that lets you invest in the crypto market with ease. Although it doesn’t offer any arbitrage strategies, you can make use of Shrimpy’s attractive portfolio rebalancing feature.
Portfolio rebalancing is an act that limits losses and secures profits by routinely readjusting the weightings of your assets. The point of rebalancing is to keep your weightings as close to their original allocation as possible.
If an asset’s price rises too high, Shrimpy will sell the asset and reinvest its profits into assets that haven’t moved yet. What can potentially happen is that the other assets start growing in value, and you earn more money by having more coins from the prior rebalancing.
Asides from portfolio rebalancing, Shrimpy also features a highly advanced social trading tab where users can copy trade professional traders. A bot will monitor the leader you follow and check his trading history each minute. If he makes a new trade, the bot will automatically execute the same trade. This means that you’ll profit if the other trader profits too.
Other cool features include: DCA strategies, index creation, all-in-one portfolio management, and backtesting. Not to mention, Shrimpy has integrated more than 30 exchanges and digital wallets — making it one of the most beginner friendly crypto trading bots.
What to Look For in a Crypto Arbitrage Bot
With so many options, it’s difficult to decide which crypto arbitrage bot to use. Most platforms offer similar features, and without trying them all out, you won’t be able to tell which one best suits your needs. This begs the question: what should you look for in a crypto bot?
Here is a list of three features that I always check out first before trying out a cryptocurrency bot.
Price dictates everything nowadays, even the crypto bot you’ll use. Always check the pricing of an automated trading service before subscribing and make sure that it fits your budget.
There’s no point in paying $100 per month when you only plan on trading a few hundred dollars per week. The subscription will eat up all of your profits, and you might even end up in a loss if you don’t win any money.
Moreover, there’s also no point in using a service that enforces annual subscriptions. Who knows, you might end up using the trading platform only for a couple of months.
I recommend to start small. Pay for the cheapest subscription you can find and fiddle with the basic tools before moving forward. You might not even need the most advanced features, so save every penny you can.
Don’t even think about connecting your exchange account to a crypto bot if it isn’t secure. You don’t want to lose your capital to a fraudulent service or to an unsecure service that’s seconds away from suffering a hack.
The best crypto arbitrage bots allow you to configure your API key and decide what the bot can and can’t do. For example, you might want to limit the bot from withdrawing funds from certain portfolios or using more than a specific amount of capital.
Team reputation is also important security-wise. Search for a bot operated by a team of professionals that has been in the crypto market for a long time.
Speaking of exchanges, you want to confirm that the bot of your choice supports your main crypto exchange. The arbitrage bots I’ve listed in this article support most of the popular trading platforms.
Otherwise, check the bot if you happen to trade funds on an exchange that’s not so mainstream. I also recommend confirming whether the platform’s arbitrage bot supports the exchange you’re using.
Shrimpy is an automated portfolio management platform that helps cryptocurrency investors manage their capital through the use of a simple and intuitive app that saves time and money with the power of automation.
To find out more about our platform and discover how it can jumpstart your crypto journey, feel free to visit our main website.