Learn more about different types of cryptocurrency platforms, the basics of arbitrage trading bots, their advantages and special features.
What are Cryptocurrency Platforms?
Cryptocurrency platforms are interfaces that allow users and investors to exchange a digital currency with another. It also permits the exchange of fiat currency with electronic currency and vice versa. These platforms provide users with anonymity and security while maintaining transparency between both parties.
Over the past few years, numerous crypto-trading platforms have emerged and filled the digital currency market. The digital currency market is up and running 24/7, this ensures that the user will never miss out on any deals or massive opportunities.
Different Cryptocurrency Platforms
There are different types of crypto exchange platforms that are specifically tailored to certain users and investors. Platforms that deal with traditional crypto exchanges target people that are used to investing in the stock market. In this case, deals are done to exchange cyber cash with traditional or fiat currencies.
Another type of trading platform is the direct one where peers are able to carry out deals easily.
What happens is that they match the selling process of one party to the users’ orders, if the numbers match, the transaction takes place. The last type is known as the Crypto Brokers. When using this type of platform, the user is dealing with a broker and securing investments based on his prices.
What are Cryptocurrency Trading Bots?
One main side to crypto exchange or trade is the use of cryptocurrency trading bots. Basically, bots are computerized systems that constantly update and identify the changes in prices based on many market indicators and variables.
If a deal is about to occur, the algorithm detects the change in prices between the user and the trader and then automatically executes the trade. These bots allow traders to perform countless trades effortlessly and securely.
Arbitrage Trading Bots
One of the main kinds of trading bots are known as the Arbitrage bots. The arbitrage bots allow investors and stakeholders to purchase digital coins on one exchange and sell it to those interested. This strategy is considered as one of the safest and quickest interfaces to make profits on one hand and secure trades on another.
To illustrate, if a bot sees that the coin price on one trading platform is being sold for 200$ and 195$ on another, the bot will trade with the cheaper platform and then sell it on the other platform to make a profit.
Types of Arbitrage Trading Bots
Arbitrage bots are divided mainly into two different categories: the cross-exchange arbitrage bot and the cross-asset arbitrage bot. Cross-exchange bots are able to make profit based on the inconsistencies in prices on the marketplace. The bot buys from a cheaper seller and sells them for higher simultaneously.
The algorithm is straightforward and easy for any user to use and benefit from. Cross-asset arbitrage bots, or triangular bots, on the other hand, make profit from the price difference of assets on one exchange platform.
Advantages of Arbitrage Trading Bots
Arbitrage bots are considered one of the efficient ways to increase the value of the investors’ holdings. Not to mention that this platform gave people the opportunity to have a greater return on investment and a way to expand the way they increase their assets.
Investors usually go for cryptocurrency arbitrage because it is fast and most often yields a substantial amount of profit per deal.
One of the most important features of any crypto trading bot is that it is quite user friendly and grantees the possibility of making a profit rather quickly, efficiently, and securely. With just a computer hooked to the internet and a bit of knowledge in this field, one can directly dive into investing and trading.
Disadvantages of Arbitrage Trading Bots
Although arbitrage trading bots provide users and traders with a seemingly easy interface and a secure platform to initiate deals and facilitate trades, these bots still have their own limitations. To exemplify, the verification of transactions takes time and the prices of the digital currencies might deflate or inflate meanwhile.
Additionally, in some cases, the exchange fee might be too expensive, which leaves the user with no profit at all. Besides, in order to make profit, one must trade large volumes on both platforms. It is also worthy to note that the user must pay extra attention to adjust the parameters of the bot when necessary.
To sum it up, fully automated and Artificial Intelligence (AI) integrated bots are now available for the vast majority of users to facilitate trading and secure online deals in a fast and trusted manner.
Although many profits and revenues have been made by trading cryptocurrencies, users must remain aware at all times to minimize any risk during trading. The user must remain cautious and rational at all times and not place all of his faith in automated systems as errors and risks are still there.