Monday, 04 July 2022 18:48

Investing in cryptocurrencies

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The world of cryptocurrencies opens the door to various possibilities for trade, purchases, transactions, and other forms of investment, however, one of the problems with cryptocurrencies lies in their lack of stability.

 

Unlike other assets or conventional currencies, in fact, the value of crypto is not defined by an institution but by its market relevance and the general public's perception of its stability.

While it is true that investing in crypto can lead to a very high return on investment, compared to other more traditional types of investments, it is also true that the risk can be much higher. For this reason, more stable and secure virtual currencies have been coined. We are talking about Stablecoins, Cryptos that have an exact correspondence with conventional currencies such as the dollar.

These cryptos exploit the exact same blockchain system that is also used by most digital currencies, and which guarantees the absolute security of transactions. Unlike conventional cryptocurrencies, it is not possible to mine these, but only to buy them with their corresponding price in dollars.

One of the safest ways to earn money in crypto, however, remains arbitrage. Let's take a closer look at what it is.

Simply put, arbitrage is a speculation that is carried out on the digital currency itself. In fact, the same cryptocurrency has different values on different exchange websites. The price on different exchanges for the same coin can be different, and arbitrage consists of buying a coin from an exchange where it is sold at a lower price and selling it on an exchange where it is listed at a higher price, earning money in the process

Put like that, the procedure might seem simple and totally safe. But there are a few factors that need to be considered.

Firstly, each exchange has a limit on the volume of transactions. This means that if the volume is low, it can take minutes between the purchase transaction on one platform and the sale on another. A few minutes may seem like something of little importance, but in the crypto world, the value of a currency is constantly changing: the crypto you buy right now may depreciate within minutes before you are able to sell it.

Another factor is the price of commissions that exchange websites apply, which affects profit.

The safest and easiest way to try to make money through arbitrage is to use a specialized platform that uses an AI to compare prices on different exchanges faster than a person could and propose the best times to execute.

Substantial profits can only be made from arbitrage if transactions take place almost instantaneously through such programs.

The best times to execute this type of transaction are when there are the greatest price differences. When a digital currency is placed on the market for the first time, for example, it is easy to find this difference between different exchanges, which have not yet had a chance to adjust the price. Also of great importance is the news that circulates about the currency in question and that can create a certain buzz in the market.

Obviously, never be reckless: before investing, it is advisable to inform yourself and put in place an appropriate strategy to limit risks and optimize gains.

 
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