Those looking for a new way to invest online have surely already heard of cryptocurrencies, a type of virtual currency that, until a few years ago, was known only to experts in the field of online investments but that has recently reached such popularity that everyone has heard of it at least once, but what exactly are they?
We can define, quite simply, cryptocurrencies as digital representations of value that have no physical counterpart. Their management is not controlled by an institution such as a bank, as is the case with conventional money. In this case, we speak of a decentralized system.
This virtual currency is used to perform transactions, make purchases, or investments. If you are worried about the safety of your virtual money, don’t worry: this type of transaction is made absolutely secure by technology using algorithms and encryption systems. Each digital currency has its own characteristics and is used in certain areas rather than others. The most widespread and, certainly, most famous cryptocurrency is Bitcoin.
While initially there were only a few dozen cryptocoins, today there are thousands.
What is arbitrage?
The arbitrage system is one of the safest and most stable ways to make a profit when buying and selling cryptos.
This virtual currency can be bought on exchange sites, i.e. platforms that allow cryptocurrencies to be bought and sold.
The basic concept of arbitrage is that we can buy a cryptocurrency on one exchange site where a specific cryptocurrency is sold at a lower price, and immediately resell it on another exchange site where it’s listed at a higher price.
All too easy, you might think! And indeed, even here there are risk factors to consider.
One of the key factors concerns time. The value of virtual currencies can change a lot even in a matter of minutes, so it is essential to execute the exchange as quickly as possible.
We will also have to do some mathematical calculations, considering the commissions that exchange sites retain and which, of course, affect our earnings.
What is the best way to do this?
Doing arbitrage manually is very complicated and risky: not only is it time-consuming to do it by hand, but it is virtually impossible for a person to compare the value of a cryptocurrency on hundreds of different sites in real-time.
That is why software or online trading platforms are used that compare the prices of assets on different exchange websites, pointing out the most important differences.
Some of these make use of artificial intelligence, which enables real-time comparisons of the value of cryptos on the various exchanges and makes the transaction as fast as possible and at the most profitable time.
Obviously, there is no such thing as a 100% risk-free system, but arbitrage is still one of the safest and most tested methods of making money while minimizing risk.
We recommend, however, studying the world of cryptocurrencies and its trends and fluctuations well before embarking on this system, so that you have the necessary background to start investing.
