Is making money from arbitrage really risk-free? On-chain data reveals the truth about encryption arbitrage.

Arbitrage sounds beautiful: low risk, no need for analysis, instant profits. But the reality is that 90% of those who want to engage in arbitrage end up losing money. Why is that? Today, let’s break down this seemingly perfect arbitrage myth.

What is Arbitrage? It's not as simple as you think.

The core logic is simple: The same coin has different prices on different exchanges. You buy where it's cheap and sell where it's expensive, making a profit from the price difference.

For example, ETH is 1500 USD on Binance P2P, and can be sold for 1600 USD on WhiteBit, theoretically making a profit of 100 USD. But there are traps here:

• Inter-exchange transfers may have delays → The price difference may disappear during the transfer period.
• Transaction fees can eat up profits in minutes → Withdrawal fees + Order fees + Slippage, which can total 5-10% disappearing.
• Large transactions will affect the price → When you buy, the price goes up; when you sell, the price goes down.

So true arbitrage is not the kind of “just operate casually to make money” that you think, but rather a professional activity that requires precise calculations, quick execution, and large transactions to be meaningful.

Why did some people make a fortune through arbitrage?

The market situation in 2017-2018 was special:

• The Golix exchange in Africa has a BTC price that is 87% higher than the global average (due to financial isolation in the region + high inflation ).
• Long-term premium of BTC on Japanese exchanges (foreign exchanges banned) → This arbitrage opportunity is precisely what helped Alameda Research get started.
• The “kimchi premium” in South Korea still exists (regulatory closure)

But starting from 2018, professional market makers and institutional capital entered the scene, using automated robots to seize price differences in seconds. Now, the arbitrage window has shrunk from a few minutes to a few seconds, and retail investors cannot react at all.

Several Ways to Arbitrage (Increasing Difficulty)

1. Single Exchange Arbitrage ✅ The simplest

• Operate simultaneously on the BTC/USDT and BTC/BUSD trading pairs on Binance.
• Advantages: Fast transfer, second-level operation
• Disadvantages: Small price difference, each order may only have a profit of 1-2%

2. Cross-Exchange Arbitrage ⚠️ Risk is starting to rise

• Buy ETH on Binance, sell ETH on WhiteBit
• Need to manage multiple accounts at the same time and go through KYC.
• Withdrawal delays may disrupt the entire Arbitrage chain.

3. Cross-border P2P Arbitrage 🔴 The most complex

• Involves multiple fiat currency entry and exit points, exchange rates, and different payment methods
• The transaction fees and time costs are skyrocketing

4. DEX Arbitrage 🤖 requires programming

• Utilizing the price differences of different liquidity pools such as Uniswap/Curve
• Robots will front-run before the transaction is on the blockchain.
• 99% of retail investors are eaten by robots

How to find arbitrage opportunities?

Free Tools:

• CryptoRank → Directly check the “Arbitrage” tag to see the price differences across exchanges.
• CoinMarketCap → Comparison of the price of each coin across all exchanges
• Dexscreener → Price differences in DEX liquidity pools

Paid Scanner:

• Coingapp, ArbiTool and other automated detection of price differences
• But be careful: many scanners require connecting to the exchange API or depositing funds.
• Key Warning: You have granted account permissions to an unfamiliar software, and no one can afford the losses.

Frozen “Arbitrage Signal” Group:

• TG channels and closed VIP groups often boast about some “invincible arbitrage chains”
• Reality: Information is delayed by 3-5 minutes, the price difference is already gone.
• These paid courses/signals are basically just a trap for retail investors.

What does a complete arbitrage chain look like?

Assuming a 15% Arbitrage opportunity is found:

1. Buy BTC with USDT on Binance P2P (Cost: 1% fee)
2. Withdraw BTC to WhiteBit (Cost: 0.0005 BTC miner fee)
3. Sell on WhiteBit for USDT (Cost: 0.1% trading fee)
4. Withdraw USDT to Binance (Cost: Withdrawal Fee)

A 15% profit on paper may actually result in only 3-5% in hand. Moreover, once this opportunity is made public, market maker bots will eliminate this price gap within 3 seconds.

Why Can't Most People Do Arbitrage?

✗ Slow response: Manual operations can't keep up with robots ✗ Account insufficient: Only 1-2 exchange accounts, limited options. ✗ Small Capital: Below $100,000, the fees eat up most of the profits. ✗ Poor Technology: Unable to write bots, cannot understand on-chain data ✗ Scammed: Enrolled in a fake training course, used a trojan scanner

Is Arbitrage Legal?

Legally valid technically, but the premise is:

• Pass KYC verification (prove the legality of the source of funds)
• No need to use mixers or privacy coins to evade regulation
• Comply with the exchange's API policy (some exchanges prohibit automated trading)

When operating across countries, it is important to pay attention to local bank policies, as some countries' banks do not support cryptocurrency withdrawals.

Conclusion: Is there still an opportunity for Arbitrage?

Yes, but not in the way you think:

• ✅ Professional market makers + large funds + automated systems → still making profits
• ✅ Discover temporary price differences in local exchanges for small cryptocurrencies → There are opportunities
• ✅ Initial inefficiency of newly launched tokens on DEX → Opportunity
• ❌ Following TG signal groups → 99% loss
• ❌ Purely manual operation → Transaction fees will eat into your profits

Want to really do Arbitrage? You need: to manage 30+ exchange accounts, write automated bots, understand on-chain data, and invest millions. Most people overestimate their execution ability and capital.

Rather than thinking about arbitrage opportunities every day, it is better to spend time researching fundamentals and holding long-term positions. This is a less glamorous but more reliable way to make money.

#Bitcoin [#交易策略](#Trading Strategies)