Bitcoin arbitrage, pros and cons, experience and profitability

[billysweird]

Hey guys,

I have been involved in Bitcoin arbitrage for several months now and it has been quite profitable. For those of you unaware how this works, arbitrage is the process of taking advantage of BTC price difference between BTC exchanges. In other words, purchasing Bitcoins on the exchange with the lower price, and re-selling those same coins on another exchange and profiting through the difference.

I did some arbitrage on my own  last year when there was a huge spread between Mtgox and Bitstamp Bitcoin prices, in some cases between 5-10%. The main problem was how to move BTC and/or fiat between different exchanges and the fact that in order to reduce the arbitrage risk to a minimum one needs to be able to buy BTC on an exchange with low price while selling the same amount of BTC on another exchange with high price AT THE SAME TIME. Recently, the spread between exchanges is not so wide anymore but there are a lot more exchanges, so there is still a lot of money to be made on this.

Have you ever performed arbitrage on your own, were you successful, what was your biggest problem, please share your experience.

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so is it risk?
i don't have much money, but i want to buy and sell bitcoins.
if it is so profitable, i will do bitcoin arbitrage.

[noviapriani]

Higher transaction costs, The trader must pay the bid-ask spreads on three separate trades, Arbitrage opportunities are usually short-lived.

[crazyivan]

All true but for the last couple of weeks, the spread between major exchanges is between 2-3%. This leaves a lot of space for arbitrage.
When you factor in trading BTC for alt currencies, the entire story becomes even more interesting. ATM it is definitely profitable.

[omio]

Crazyivan, can you tell me how you get fiat in and out of btc-e without taking a loss on the withdraw/deposit fees? I'm assuming that's one of the main exchanges you use to arbitrage. Would you share the other exchanges you use as well?

[crazyivan]

I do not do BTC-fiat arbitrage personally anymore cause I simply have no time to follow major exchanges. When I did it, there was a specialized website for transferring BTCe certificates into cash/BTC called Bitinstant. Unfortunatelly, they don't do that anymore and I am not sure whether there is any other website doing the same thing.

What I do now is use the website from my signature to do all this for me, have been using them since February and I am very happy with them. The other option I do is BTC-alts arbitrage, basically you follow the price of alt coins on different exchanges, Cryptsy, Mintpal, Poloniex, etc. and take advantage of their price difference vs BTC. If you do this, make sure to choose coins with quite fast confirmations since you must be able to transfer these from one exchange to another quite fast. Also, do not get greedy, aim for 5% price difference max cause this might be quite risky if you do not know what to do. Let me know if you need more help and be careful with your investments.

[OCG]

Heh, that is really cunning plan. But I am really interested in experiences of people who have been actually doing arbitrage. With this constant 2% spread on average between exchanges, there must be some people who profit on this. Am I the only one making money on BTC arbitrage?

2% spread on exchanges does not include withdrawal fee's etc. so as long as you have large enough order sizes that can compensate the fee's and have an amount of dollar/alt/bitcoin on both exchanges for instant use. then the arbitrage is just the slower movement of funds to replenish the reserves you have just used in the trades.

sometimes its not worth it for a 1-2% as the time to replenish the reserves can make you miss out on bigger price changes.
(getting dollar from exchange A to exchange B is not a 10 minute task)

best method.. say you have $10k investment split it up into 4 reserves of $2.5k

exchange A
$2.5k deposited into here and left as dollar
$2.5k deposited and turned into bitcoin

exchange B
$2.5k deposited into here and left as dollar
if lower in price $2.5k deposited and turned into bitcoin
if higher in price use Exchange A to buy the bitcoin with the deposited reserve and transfer bitcoins to exchange B
and deposit the spare 4th $2.5k into exchange A to replenish that dollar reserve

now the rest is a juggling game

i mess around with arbitraging bitcoins with altcoins(fast exchange withdrawal/deposits). so feel free to replace the '$2.5k' with an altcoin amout of your choosing that matches bitcoin total you also have. and someone else said it, but i have 90% of funds in cold store and only play arbitrage with 10% of total. as thats my limit of trust with third parties.
the best volumes and price movements are on the dollar hense using dollar as an example. (slow dollar movement through accounts). id say small amounts below 5btc can get away with altcoin arbitraging. large amounts 20btc($10k+) can require bank transfers alot, just to be on high volume exchanges

Now this is the answer I was searching for. Franky1, thank you very much for this detailed plan, I ll try something similar, only with a bit lower investment. How I miss those days when Bitinstant and Mtgox were around.

I have been investigating arbitrage options for some time now, and it looks to me as if a lot of people doing that do not change BTC to USD and then transfer the USD from exchange A to exchange B, but instead use DOGE for this!! DOGE has been pretty stable the last few weeks and transferring them is very fast.

[crazyivan]

Yup, doge is definitely one option. Also, I know some people exchanging BTC to Chinese Yuan, then using Yuan to buy some other coin and selling that coin on another exchange. As I have stated, possibilities are endless.

[OCG]

Changing to Yuan?? What exchange is still able to offer that? 

[Cryptology]

Hello crazyivan. This is an interesting thread. I was wondering to what extent have you been able to automate your trading. What some people may forget is that a $5 opportunity may not be worth your manual efforts but can be gold if you can automate most if not all of the process.

[audrey-chicka]

You can´t beat buy and hold in the long run with that.

Thats my opinion at least. 

[crazyivan]

Well, there are several bots in the market, people use them and they can work. Especially when the price is volatile but still revolves around a quite stable anchor. What I mean by that is that the price moves between 430-450 for weeks so setting your bot to take advantage of these mild price swings can be profitable. If intend only to focus on BTC to fiat arbitrage opportunities, you need to have a lot of liquidity. That is why I do not do that anymore but I use these traders from my signature.

I mainly do alts to alts arbitrage, much easier to transfer coins from one exchange to another. Would not disclose my exact tactics since markets can be easily saturated but this definitely works.

However, arbitrage trading takes a lot of skill and even more time to follow the markets. For example, while I was browsing through forums today, Sunday, I read a piece of info about Darkcoin article being published into Wires magazine this week. This might have a positive effect on price so I bought some Darkcoins which I intend to sell if the price goes up. Let us see whether this was a decent arbitrage decision.

One final piece of advice, USE YOUR HEAD and never be too greedy. Invest smaller amounts and increase them gradually.

[Moedas :D igitais]

One coin that works well between 2 reputable exchanges is BlackCoin.
Why i do it with BC/BTC ? Normally there's a nice spread between Mintpal and Cryptsy. So, buy on BC on Mintpal, sell on Cryptsy for BTC.
Cause its one of the fastest confirmation coins, takes very little time to come to my wallet. Even faster, on your withdraw wallet on Mintpay, add your receive wallet for Cryptsy. Do the reverse to transfer the BTC from Crypty to Mintpal.

Some days, there's no opportunities, some others there is, like everything else that is subject to the laws of demand/supply.
With a decent volume, you can make a few thousand satoshis. Then if you want cash, use a regular exchange, Kraken, etc.

Regarding arbitrage with fiat its more complicated, still buying BTC on BTC-e and selling on Kraken is very very rewarding as the spreads are ridiculous.
But i believe altcoins are altcoins, so I would never exchange fiat for altcoins. In my opinion arbitrage with crypto should be done entirely with crypto.
Also the fees of Mintpal and Cryptsy are quite "eatable".

Again, due to volatility, never spend "money" you can't afford to lose.

[omio]

Sorry but bitcoin-trader.biz is a HYIP. Look at the % return its a basic ponzi, they even use shadowscripts. They don't arbitrage at all, just pay you with new money coming in. It is common in the HYIP community to claim they make their money with arbitrage.

[floatertheplayer]

Its funny all this hype from ponzi scheme arbitrage advertisers. I have the hard data of millisecond by millisecond arbitrage opportunities from 6 major exchanges on which my bots operate.

Simply anyone who says they do profitable arb by hand is a liar, or cannot count for exchange default risk or payment service provider risks. No human can compete with my bots acting within 20 milliseconds by searching for thousands of arbitrage routes using 10 different IP addresses to gather the fastest data that beats public services like Bitcoinwisdom by seconds.

All I can say is that after bank transaction costs and currency exchange costs last month used to be 1.5% daily risk adjusted return on the whole capital, but this month so far is pretty shit 0.5%. So guys who claim 1%+ per day for this month by hand are pathetic liars.

[crazyivan]

I repeat, do not consider arbitrage as BTC to fiat trade only. This is only maybe 5% of my current trading activities. With BTC to alts and alts to alts, costs are minimal and turnover time is just a couple of minutes. Regarding Bitcoin trader, well, I am about to reach full ROI in less then 2 months, I ll let you know how it went.

[crazyivan]

BTC arbitrage opportunities are still present, however, I have noticed the market is slowing down, I find less and less dept and less BTC being traded in general. I hope people just hold waiting for better price these days since we have been having this decline and stagnation for almost 5 months.

[crazyivan]

Today 4% difference between Bitstamp and BTCe prices at one point. WTF is going on, why is BTCe price so low.

[HerrAndreas]

"1% a day"
for any investment 

if that promise alone does not ring all (really all) alarm bells in your head, you are on the road to get fucked over pretty hard.

[HerrAndreas]

"1% a day"
for any investment 

if that promise alone does not ring all (really all) alarm bells in your head, you are on the road to get fucked over pretty hard.

A trader is not successfull, when he is making less than 30% a month. So far bitcoin-trader.biz had not a bad result at all. Bitcoin-trader is legit, if you want or everybody else I share 50/50 the provision if you invest over me. So you get 2,5 % of your investment immediately back (just email me your btc adress)

thanks.
but no thanks.

I prefer to trade myself.
I only have to trust the person in the mirror and I get to keep all the profits (excluding taxes).

[crazyivan]

So you do believe in trading/arbitrage? I thought u just played safe.