The Beginner’s Guide to Making Money with Crypto Arbitrage (2024)

Crypto arbitrage trading may seem complicated but it’s actually a simple way to earn passive income.

Here’s my complete guide to getting started and how I earned over $10,000 last month doing it.

We strongly recommend that you check out our guide on how to take advantage of AI in today’s passive income economy.

Crypto arbitrage trading involves buying cryptocurrencies on one exchange where the prices are low and then selling them on another exchange where the prices are higher. The difference between the buy and sell price is your profit.

For example, if Bitcoin is trading at $20,000 on Exchange A but it’s trading at $20,500 on Exchange B, I can buy Bitcoin on Exchange A and then immediately sell it on Exchange B to pocket the $500 difference.

The reason crypto prices vary across different exchanges is due to inefficiencies in the market. The prices are based on the most recent buy and sell activity on each exchange. More demand on an exchange pushes the price up, while more selling pressure pushes it down. These price discrepancies create arbitrage opportunities.

Here are the steps I followed to get started with crypto arbitrage:

1. Open accounts on multiple exchanges

I signed up for accounts on major exchanges like Coinbase, Binance, and Crypto.com. I also opened accounts on smaller exchanges like KuCoin, Gate.io, and Kraken.

Having accounts on both big and small exchanges gives me access to more opportunities. The major platforms tend to have higher liquidity while the smaller ones sometimes have bigger price discrepancies.

2. Fund the accounts

I deposited some funds as USDT (Tether stablecoin) on each exchange. USDT allows me to easily transfer funds across platforms without volatility concerns.

I started with $1,000 in capital on each exchange for arbitrage trading. As I gained experience, I increased my trading capital to over $10,000 to scale up profits.

3. Identify price divergence

I use sites like CoinMarketCap and CoinGecko to analyze price differences across exchanges. I look for coins trading at least 1–2% higher on one exchange compared to others.

I also track newly listed coins, which often spike on major exchanges first before trickling down to smaller ones. These temporary distortions offer great arbitrage opportunities.

4. Execute trades

Once I’ve identified a price divergence, I buy the coin on the lower-priced exchange and sell it immediately on the higher-priced exchange.

I use limit orders to ensure I get the desired entry and exit price. I complete the round-trip trade within minutes before the prices converge again.

5. Withdraw profits

After closing the trades, I withdraw my profits as USDT back to my main exchange account. I repeat this process several times a day to compound gains.