Arbitrageurs Are Making A Killing Despite The Crypto Market’s Hot Mess

Arbitrageurs Are Making A Killing Despite The Crypto Market’s Hot Mess

June 14, 2022 0 By Jeanine Sanchez

Since the start of this year, digital assets, including BTC, have been trading within a range, and some are even on a decline. Hence, the regular buy-and-hold investors have no option but to sell. The alternative is to be very patient, but most are willing to cut their losses.

Milking The Market In This Bearish Times 

Nevertheless, a category of veteran investors is still making a killing in this market. This group of investors are the arbitrageurs; a popular example is hedge funds. They make profits from changes between exchanges and geographies.

While speaking about their arbitrage method, Anatoly Crachilov said, “we still made money during last month’s market collapse.” The London-based nickel digital asset management CEO further said, “we gained 40 basis points for that month.”

Arbitrage trading is buying an asset at a cheaper rate from one geographic region. Then, selling it on another platform for a higher price. Thus, the arbitrageur makes profits without holding the asset over a mid-or long-term period. It is an attractive option for investors willing to take risks involved.

It needs special access to several markets and exchanges. It also requires some algorithms which only the best hedge funds can access to make profits. Last week, PWC released its global crypto hedge fund data. The report states that this is the most commonly used method of profiting from the crypto market among hedge funds.

According to the report, nearly 33% of all currently active crypto funds are hedge funds. K2 trading partners stated that its crypto arbitrage fund had generated a 1% ROI between January and May 2022. This fund generated this ROI despite being algorithmically driven.

By comparison, BTC has lost 32% within the same timeframe. Similarly, stack fund’s arbitrage-based fund lost 0.2% last month. However, its long/short trading fund lost over 30% in the same month. That fund has exposure to liquid cryptos; that was its biggest monthly loss.

Surviving Through Different Ages And Markets

Arbitrage strategy has been popular for many years in different markets. Hence, it is no longer surprising that arbitrageurs also make huge profits in the fast-rising crypto market. According to industry analysts, the inconsistent regulation of the crypto market has cleared the way for many exchanges to make huge profits with this strategy.

K2 trading partners founder Hugo Xavier claims that arbitrageurs have benefited from zero interconnection among crypto exchanges. He said that means exchanges list tokens at different prices. Thus, arb traders can make a killing.

Xavier used the BTC price as an example. He said the BTC price at Coinbase on June 13 was $27,493. However, it was listed on Bisq at $28,067 on the same day. According to him, this is one of the many benefits for arb traders.

Some critics say that arbitrageurs also suffer losses when exchanges go offline or freeze their funds. However, Xavier claims that “exchanges going offline is nothing new. However, they can’t freeze your funds without reason.”