Cryptocurrency Arbitrage — Idea
Around the second COVID wave, I was going to my friend's marriage in a cab, it was a long trip. I was looking out the night sky from the window, thinking about different things and unknowingly I started smiling. My other friend who was watching me with suspicion first judged me and then raise his eyebrow. I said I have figured out a way to be rich.
After somehow convincing him to let me think on it for a while I started calculating things in my head. Due to excitement, I was not able to focus on the calculations. My mind was directly jumping to the future when I will be rich, questions started coming like what will I buy? and how I will live my life? and How I will like to be retired? Yeah, it’s funny but I actually started thinking that. These thoughts didn’t have any significance at that point but later they helped me identify things I never imagined needed to know.
Things were getting a roller coaster in my mind with all these thoughts, so I quickly opened Evernote and dumped all my thought processes into it.
It was a formula of how I will trade crypto.
Coindcx is a major crypto platform in India. I was checking my holdings and the rate of Ripple was ₹82. When I switched to my watchlist, there the same crypto was ₹76 and it was confusing me. After a little exploration, I was able to figure out it was because of two different markets, trading the same crypto with different base currencies. And Coindcx is calculating the other market’s value into my currency in the watchlist section. So to make it simple. Buy from USDT market — ₹76
INR market — ₹82
Now the idea seems to be obvious right, whatever difference there is it will be my profit.
At that time I was not aware that it is called arbitrage, I was like what have I done? am I a genius? have I found my own way to be rich? I know how stupid of me.
So, let me define, what is arbitrage? buying an item and selling it in a different market with a profit. In my opinion, it is not unethical it’s an opportunity.
There are few limitations to arbitrages, always needs two different markets, and to grab a good profit need to transact a large amount.
Arbitrage is an old thing, that had been done in past, people are doing it right now and will be in the future.
There are some great stories of arbitrage i.e. a guy in the 1950s found a way to earn money, what he observed was that postal tickets cost less outside the USA and it was due to the subsidiary provided by the government so that outside people can send things to their loved ones in America. He build a group of people outside the USA, who would buy the ticket and send them to him.
He made millions using this.
Currently, people are using Aliexpres and Facebook marketplace to set up the arbitrage. They simply check for the high-selling product on the platform and find the same one on Aliexpress, now they post the same product in the Facebook marketplace at a little high rate and earn the difference.
There was a startup around 2020 that raise millions from investors as they have shown the mathematics behind the crypto arbitrage between the exchanges.
After coming back from my friend's marriage, I thought why not build my opportunity grabber.
Next, I will share the calculation and thoughts that went into building it.
