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What is Arbitrage?

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Arbitrage is a trading strategy that involves buying and selling assets in different markets to take advantage of price discrepancies. The basic idea is to buy an asset in one market where it is undervalued and then sell it in another market where it is overvalued. The goal is to make a profit by exploiting the difference in prices between the two markets.

At FiveWest we have been quite successful at using this strategy. In this blog, we will explore how exactly arbitrage works and how FiveWest uses this strategy to generate returns for its investors.

How Does Arbitrage Work?

Arbitrage is a complex trading strategy that involves identifying price discrepancies in different markets. These discrepancies can arise due to a variety of factors, such as differences in interest rates, exchange rates, or regulatory environments. The key to successful arbitrage is to find assets that are mispriced in different markets.

The process of arbitrage can be broken down into three steps:

  1. Identify an opportunity: The first step in arbitrage is to identify a price discrepancy in two different markets. This can be done manually or through the use of advanced algorithms and machine learning.
  1. Execute the trade: Once an opportunity has been identified, the next step is to execute the trade. This involves buying the asset in the undervalued market and selling it in the overvalued market.
  1. Lock in the profit: The final step is to lock in the profit. This is done by selling the asset in the overvalued market and buying it back in the undervalued market. The difference in prices between the two markets is the profit earned from the arbitrage trade.

FiveWest and Arbitrage

FiveWest has built a seamless proprietary trading platform that specializes in arbitrage to identify and exploit these price discrepancies in different markets.

We have now restarted arb after SVB, Circle halted USD Deposits. We are now safeguarding the client funds 100% without any link to third parties. This will ensure that client funds are kept within the ecosystem.

Crypto Arbitrage

In the world of crypto, FiveWest uses its algorithms to identify price discrepancies between different exchanges. For example, suppose that Bitcoin is trading at $50,000 on one exchange, but it is trading at $55,000 on another exchange. FiveWest can buy Bitcoin on the lower-priced exchange and then sell it on the higher-priced exchange, making a profit on the price difference.

Published: 18 October 2022Arbitrage
Pierre Van Helden
CO-FOUNDER & MD

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