If you are altcoin and BTC HODL investor. You can utilize the arbitrage strategy to increase your profit in the same time of gaining market beta exposure. What if I am beginner? How shall I start?
If I am a beginner in this crypto trading and would like to start with arbitrage. This is my scenario:
- I have less capital. I have only 0.50 BTC in total.
- I understand the spreads of LTCBTC pair in Exchange A and B is consistently exists
- I am bullish of LTC and think it will appreciate x number of times in the next 1 or 2 years.
- I would prefer to focus my capital in one single coinin this scenario.
- I will buy 0.25 BTC worth of LTC. i.e. 0.011. I will get 22 LTC.
- I will then place allocate 22 LTC and 0.25 BTC into Exchange A and B to start the arbitrage strategies.
- Whenever the 1.00% spreads exists(this is my preference) I will start to sell 1 LTC @ Exchange A and buy back at Exchange B each time.
- Each time I will capture 0.00011 BTC as profit in single
- Since I have 22 LTC, i may be able to perform 22 times to capture 0.00242 BTC with my capital until my LTC is used up in either Exchange A or B.
- I will then transfer LTC and BTC back to the position for arbitrage to start again. At this point, I expect my LTC position maintained at 22 but my BTC increased with the profit of 0.00242 BTC.
- By doing this few times a day, I can capture relatively decent profit in single day.
Since arbitrage activities involves coins transfer and BTC as funding vehicle. I would rather to stay focus in single pair rather than doing few pairs at the same time.
Note: This is my own preference scenario. I am not financial adviser that advise you to do so. I am sharing my experience gained after this few years of arbitrage strategies in crypto currency.