We hope you had a great weekend. Now it's time for another crypto week.
One of our aims at Market Meditations is to provide our readership with opportunities to Build Wealth. This goal is not dependent on whether the market is bullish, neutral or bearish.
🌅 Today, we explore new horizons and share a profit opportunity that can be successful in any market condition.
As well as the hottest crypto market news and weekend updates.
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This article is inspired by one of the Exodus blogs. We are delighted to be partnered with Exodus. One of the top cryptocurrency wallet providers. The Exodus wallet is free and can be downloaded on your computer or phone by using our link. The wallet allows you to easily store, trade and earn interest on your crypto from one place.
According to Elon Musk’s tweet on Sunday, Tesla will resume accepting Bitcoin as payment once miners go halfway green.
The news appears to have driven the price of bitcoin and other cryptocurrencies up. Albeit some analysts are suggesting a ‘chicken and egg’ type scenario whereby Musk is tweeting when the market is already rallying (to give the impression of influencing the market).
Unpacking the tweet:
“Tesla only sold ~10% of holdings”. Meditators, please note this is not recent news. This was a sale from a while back when Tesla was sharing it’s Q1 reports.
“When there's reasonable confirmation”. Admittedly, this is a vague statement. There is widespread debate over where the industry currently stands in terms of clean energy usage so it’s unclear where Musk will source his data from.
All in all, this is still a positive indication of a first benchmark for reinstating bitcoin payments at Tesla. From a technical standpoint, there are a few key levels we still would like to see reclaimed before we can shift our bias to bullish. A close above the $40k level would be a good starting point.
Much like the rest of crypto, it’s not as fancy or complicated as it sounds. With the right explanation and resources, anyone can do it. Arbitrage is when a trader buys crypto on one platform and sells it on another to take advantage of price discrepancies. Take an example:
A trader could sell 1 BTC on Binance for $45,000 and buy 1 BTC on Coinbase for $100 cheaper.
On the face of it, it’s a fast and low-risk way to earn $100
Arbitrage is possible in traditional markets too. The difference is that instead of having a couple of highly regulated “official” exchanges, in crypto there are dozens of exchanges. And because crypto trades on all these exchanges simultaneously, there is no official price for a coin like BTC. Short term supply and demand on platforms can create a situation where the same asset is priced differently depending on the exchange.
Whilst it may seem somewhat ingenuine, arbitrage is actually an essential part of every market. When people spot and trade these discrepancies, they eliminate inefficiencies and ensure that prices remain fair.
There’s a good few reasons why traders engage in crypto arbitrage:
Low Risk. Arbitrage traders occur over minutes or tens of minutes. Basically as long as it takes to buy on one platform and sell on another. As such, an arbitrage trader shouldn’t be exposed to massive price swings or risk of liquidation.
Less Competition. There are relatively less people to compete with in crypto arbitrage compared to in traditional markets.
Plenty of Opportunities. Professional arbitrage traders tend to focus on BTC and ETH but there are hundreds of coins to choose from.
Extreme Volatility. Big price movements create large discrepancies in pricing which can be great opportunities to spot arbitrage.
1️⃣ Coinbase Premium
Perhaps the most simple method is to utilise the Coinbase Premium. Coinbase is amongst the most trusted exchanges in the world (particularly in North America because it is based in the USA and therefore subject to high regulation). There is a lot of institutional demand for Bitcoin on Coinbase. So much so that crypto starts to trade for a premium on the exchange (BTC price can end up being high on Coinbase compared to other platforms). And so, a common arbitrage method is to buy BTC on another exchange and sell it on Coinbase for a profit.
2️⃣ Hold Crypto on Two Different Exchanges
Hold cryptocurrencies on two different exchanges. Whenever there is a price discrepancy, the arbitrage trader can buy crypto on one exchange and sell it on another at the same time.
3️⃣ Crypto Arbitrage with a Bot
Using a bot is one of the easiest ways to increase your profits from crypto arbitrage trading. Bots trade 24/7, meaning they can capture trading opportunities while you are sleeping or eating your lunch. Ideally, a trader would have enough coding experience to program their own bots. This allows for customization. Alternatively there are free and paid crypto arbitrage bots.
💎 This method requires its own section on what a bot is, examples of crypto arbitrage bots and also some analysis on if and when bots are worth the time and money. We’ll dedicate a full section to this in Thursday's newsletter. To receive this, make sure you’re on our free email list 👇
Our priority will always be to present a fair and truthful analysis. We’ve discussed potential benefits of arbitrage and now it’s time to consider drawbacks, so our readership can make an informed decision:
Withdrawal fees. An exchange can charge high withdrawal fees which impacts the profit on an arbitrage trade. Higher fees, lower profit. XLM, XRP and NANO are some of the coins that are preferred by arbitrage traders (fast and cheap to send).
Slippage. If trading volume is low, your order may not execute at the price you want. To avoid this, arbitrage traders tend to prefer arbitrage on the largest exchanges with lots of volume.
Confirmation times. Withdrawing from one exchange to another typically takes 30 minutes at a minimum (this might impact your window of opportunity).
Locked accounts. If you make a lot of withdrawals in a short amount of time, you might even have your account locked.
Competing against bots. Arbitrage trading is about timing. You need to spot a discrepancy and be quick to trade it. When there are bots doing the same thing, this can become more difficult.
Crypto arbitrage can be very profitable but there are some obstacles in the way. It takes some time and research but once you find your method/strategy, it can be a reliable way to make profit. . Remember, if you want to receive our guide on using bots, how to use them for arbitrage and whether they are worth it, join the free market meditations community.
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Bitcoin is set to integrate the privacy-focused upgrade known as Taproot later this year. It has been approved by miners around the world. The integration of Taproot represents the first major upgrade to Bitcoin’s code since the introduction of Segregated Witness in 2017.
Unlike the 2017 upgrade, referred to as ‘the last civil war’ because of the ideological divide between voters, Taproot has near universal support (in part because these are fairly incremental improvements to the code).
Consider the following quote to gauge the significance of the update:
“It's the first consensus change since Segwit activated in August 2017. It extends Bitcoin's script capabilities in ways that make certain things cheaper (especially more complex applications like multisig and layer 2 things), and somewhat more private by often hiding what the exact spending rules were.” - Bitcoin core developer Pieter Wuille
It will mean great transaction privacy, efficiency and the potential for smart contracts.
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On Mondays, our ‘Scan The Week’ section is designed to show our community what events and headlines we will be keeping an eye on.
Monday, 14th June
Crypto.com DOT Exclusive Campaign 💠
Users who deposit DOT will have the chance to win a share of the prize pool (USD 20,000 OF DOT). Campaign running until 24th June 2021.
Tuesday, 15th June
Federal Reserve Meeting 🇺🇸
Main economic event in traditional markets. Will be eagerly watched and anticipated for statements referring to inflation and economic rebound from the pandemic. In the past, we have seen BTC volatility on Federal Reserve Meeting days, so one to keep an eye on.
Parachain Slot Auction 📣
Kusama has announced the launch of their first parachain slot auction on June 15. Bidding on the auction will run until June 22 and a winner will be announced the same day.
Wednesday, 16th June
Biden & Putin 🇷🇺
The heads of the U.S. and Russian governments will meet on Wednesday. An important day for diplomatic relations, being the final day of Biden’s first overseas trip.
Thursday, 17th June
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Disclaimer: The content in this newsletter is for informational purposes only. Nothing in this email is intended to serve as financial advice. We are not financial advisors. Every investment and trading move involves risk. Do your own research when making a decision.