Case #1: Trade coins after an arbitrage opportunity appears.
- Buy Coin B with Coin A at a low price.
- Move Coin B to the buyer's market.
- Sell Coin B for Coin A at a higher price.
However, transaction fees, withdrawal fees, the time withdrawals take, and the presence of other arbitrage bots ruin its success. I've monitored the market for opportunities and tested this case, and so far I've only found the impracticality of it: stuck-withdrawals, opportunities that disappear, transaction minimums and fees, etc...
Case #2: Hold 50/50 coins and instantly trade them.
This case puzzles me.
It is simply not practical.
- There are over one hundred alt-coins of which one would have to have funds.
- Apart from the alt-coin opportunity funds, one would need a proportional amount of LTC & BTC.
- Most (if not all) of the alt-coins' value is volatile. It makes no sense to steadily hold funds in those "currencies". Whatever small gains acquired by arbitrage would soon dilute.
- If one had the hundreds of alt-coins required, and some (mysterious) way to manage their volatility.
I made a cryptocurrency arbitrage calculator (UPDATED)
The size of the arbitrage opportunities available wouldn't match the ROI a traditional investment offers.
Edit 1: Nitpicking the issue, it is possible to perform arbitrage on counted occasions. But I'm referring to the fact that #1 is not instant, and it's riskier and possibly not profitable.
How to PROFIT from ARBITRAGE TRADING explained!
And case #2 is flawed in the sense that is not straightforward to hold (and increase) value in a portfolio of crypto-currencies.
I've seen some "professional" crypto-coin arbitrage services, but they look more like scams than anything else.
Is there any truth to crypto-coin arbitrage? Is there a case #3, 4, 5, ..., n?