Lookonchain Reveals An On-chain Arbitrage Strategy To Earn Up To $12K Daily

October 5, 2023 - Around 2 mins mins to read

Key Points:

On-chain Arbitrage Strategy: Traders exploit blockchain price divergences, capitalizing on Ethereum price drops while BSC remains stable, profiting from the price difference.

Lookonchain recently shared an on-chain arbitrage strategy that helps two addresses earn $1.2K to $12K daily by capitalizing on crypto price disparities.

Lookonchain Reveals An On-chain Arbitrage Strategy To Earn Up To $12K Daily — Source: Lookonchain

The On-chain Arbitrage Strategy

On-chain arbitrage occurs when the price of a specific token, such as Token A, suddenly plummets on one blockchain network, while its price on another network remains unaffected.

Arbitrageurs take advantage of this price disparity by purchasing the token at a lower price on one network and selling it on the other, making a profit in the process.

Consider the scenario where Token A’s price drops on Ethereum but remains stable on the Binance Smart Chain (BSC). Arbitrageurs buy Token A on Ethereum at a lower price, then cross-chain it to BSC and sell it at a higher price, pocketing the price difference minus gas fees.

Real-Life Example

For instance, an arbitrageur spent 370 USDC to buy NGL on Ethereum, then cross-chained and sold it on BSC for 382 DAI, resulting in a profit of approximately $7 after deducting gas fees.

Having said that, not all arbitrage opportunities are profitable. Some trades may lead to losses, as demonstrated by a case where an arbitrageur lost approximately $21 when cross-chaining BUSD to Ethereum.

Arbitrageurs engaged in this strategy typically execute 5-10 trades per hour, translating to an hourly profit of $50 to $500 and a daily profit ranging from $1.2K to $12K. The profitability of on-chain arbitrage largely depends on market conditions and the frequency of large sales and purchases on the blockchain.

However, implementing this On-chain Arbitrage strategy manually is challenging. Arbitrageurs often rely on trading bots to monitor on-chain transactions, identify arbitrage opportunities, and execute trades swiftly. With the right tools, on-chain arbitrage can be a lucrative endeavor in the crypto space.

DISCLAIMER: The information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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