Why P2P arbitrage will always be profitable and remain relevant
To answer these questions, it is important to understand how arbitrage works. First of all, arbitrage means providing a service of exchanging cryptocurrency for regular fiat currency and back.
Similar to how banks exchange one fiat currency for another (USD to EUR, for example), arbitrageurs add cryptocurrency to these exchanges as well. In both cases, the main source of income is exchange operations.
As long as interest in cryptocurrency remains and its popularity grows, cryptocurrency exchange services will remain in demand.
Why is this direction always relevant? And is it possible that the spread (income/profit) will drop to zero?
A positive difference in prices when exchanging will always exist for arbitrageurs, as no one will conduct exchanges at a loss.
Commissions are included in each exchange operation for both fiat exchange services and cryptocurrency exchanges, and each operation generates income for those who conduct it.
However, inexperienced arbitrageurs may miss opportunities due to unnoticed differences in prices between P2P platforms and specific payment systems, as a result of which it may seem that it is impossible to earn or that it is possible, but very difficult.
The rates on P2P platforms fluctuate depending on supply and demand, which is a standard market model. In periods of large purchases, selling prices can rise significantly on a particular platform, and when there are large sales, buying prices can also drop sharply on the same platform.
It is necessary to be able to identify these moments and buy where prices are lowest, and sell where prices are highest. The difference between purchase and sale becomes your source of income.
The course and the final difference in prices depend on two factors: liquidity and the complexity of implementing the link:
- If the link is easy and has high liquidity, then the difference in prices will be small, as many can participate, which increases competition.
- With high liquidity, but a complex link, the difference in prices will be higher, as not everyone can cope with its complexity, which increases the spread.
- Illiquid and complex links are not attractive, as few people will be able to move capital (1) and more resources will be required, which are not available to most (2).
- If the link is illiquid, but simple, then beginners with small funds can participate, as liquidity allows for small amounts of capital to be moved.
Conclusion:
P2P arbitrage is not a simple “button press” for making quick money. Working with cryptocurrency arbitrage often represents a monotonous and uncomplicated task that requires capital and certain actions.
These actions are regularly repeated. The more efficiently and quickly you perform them, the more you earn. That is why it is harder for beginners than for experienced arbitrageurs. Therefore, we recommend that you start in this area right now. Over time, you will be able to enter the market and start earning, surpassing other arbitrageurs.
In addition, it is important to realize that the P2P exchange market and cryptocurrency arbitrage as a whole represent a huge sector in which there is a place for everyone.
