Crypto Arbitrage: The Low-Risk Yield Farming Strategy

Farming yield from your crypto assets is a great idea, but most strategies out there are risky and complicated. If a low-risk consistent strategy is what you’re looking for, this blog is for you.

Let’s learn about crypto arbitrage and answer some frequently asked questions.

In this blog, we will cover the following:

• What is crypto arbitrage?

• What are the types of crypto arbitrage strategies?

• Does Crypto Arbitrage work for you? Do you need bots?

What is crypto arbitrage?

Crypto arbitrage trading takes advantage of the price difference between two positions to make profits. For example, you buy BTC in one exchange and sell it in another with a price discrepancy - that difference is your profit. This is just one example from among the many arbitrage strategies out there!

💡 Fun fact: One of our discord moderator’s user id is ‘arbit.rage103’. 😁

What are the types of crypto arbitrage strategies?

1. Intra-Exchange Arbitrage: This is when you execute the arbitrage strategy within a platform. An example would be to profit from the price difference between an asset’s spot price and futures price in the same exchange.

2. Cross-Exchange Arbitrage: When you capitalise on an asset’s price difference between two different platforms, it is cross-exchange arbitrage. For example, if you saw price differences between the price of Eth in two platforms, you could profit from it.

3. Triangular Arbitrage: Triangular arbitrage is when you exploit the price difference between three different currency pairs within a single exchange. For instance, if you observe inconsistent rates among BTC, ETH, and USDT, you can execute a sequence of trades: Convert BTC to ETH, ETH to USDT, and finally USDT to BTC. If the exchange rates are misaligned, this cycle can yield a profit, as you end up with more BTC than you started with.

4. Contango Arbitrage: This strategy capitalises on the price difference between an asset’s spot and its futures price. If you short an asset’s futures and long its spot price, you will end up with profits.

5. Spot-Perpetual Arbitrage: This strategy aims to profit from the funding rate generated by holding long and short positions in perpetual futures while maintaining neutral positions in the spot market.

💡 Multipli uses Spot-Perpetual Arbitrage and Contango Arbitrage strategies to generate yield for our users. Learn more about this in our docs.

Now, if these strategies seem simple and easy to make money from, read on because there is more to this than you think.

Does Crypto Arbitrage actually work? Do we need bots?

Arbitrage strategies require high execution speeds, the ability to spot opportunities and ideal market conditions. Factors like transaction fees, liquidity and transaction delays could ruin your positions. You should also have excellent knowledge of market patterns to spot the right opportunities.

All such factors considered, most people consider automating the process; you can use bots to monitor multiple markets or execute trades quickly.

In conclusion, arbitrage may not be everybody’s cup of tea. But it’s features might attract a lot of you! And if you’re one of them, we have a solution for you.

Meet Multipli!

Multipli is a yield generation platform that uses delta neutral positions through contango and spot-perpetual arbitrage to generate yield. It is a simple, effective and easy-to-use platform that generates one of the highest yields in the industry. And if this got your attention, try Multipli now and let us do the grind for you!