Cryptocurrency has become one of the investment options for many people nowadays. However, newcomers often find themselves overwhelmed by the complex user interfaces of exchanges and the various investment jargon, leaving them unsure of where to start.
To address this, “WEB3+” has launched a series of reports called “Crypto Investment in Plain Language”. This series aims to introduce the most accurate concepts of cryptocurrency investment, as well as the underlying logic, innovation, and latest trends.
What is “Brick Moving” Arbitrage?
“Brick moving” refers to buying an item at a lower price in market A and selling it at a higher price in market B.
Zhang Hanlin, CEO of Taiwan Exchange Bitgin, gives an example: if someone is looking to buy a PS5 for 20,000 yuan on PTT, and the PS5 is being sold for 19,800 yuan on a shopping website, one can place an order on the shopping website and then resell it to the buyer on PTT, making a profit from the price difference. This behavior is called “brick moving”.
In the cryptocurrency market, there are slight price differences between exchanges. Users can buy at a lower price on one exchange and sell at a higher price on another exchange, thus earning the price difference. For example, if the stablecoin USDT is priced at 30 yuan on exchange A and 30.05 yuan on exchange B, users can profit by buying from A and selling from B.
How does brick moving arbitrage work?
Mode 1: Manual brick moving
The simplest way to brick move is for users to observe the exchange rates of two exchanges themselves and manually go through the process of buying at a low price on exchange A and transferring funds to sell at a high price on exchange B.
Mode 2: Hedge brick moving
In the form of hedge brick moving, users need to have fiat currency and target cryptocurrencies on both exchange A and B. Once a price difference appears, they can immediately execute the trade.
For example, if the price of one USDT is 30 yuan on exchange A and 30.5 yuan on exchange B, one can buy one USDT on exchange A and sell one USDT on exchange B to earn the price difference.
The purpose of this mode is to solve the risk of missing the optimal profit opportunity due to the slow transfer of funds in manual brick moving. Hedge brick moving with funds in both exchanges also speeds up the buying and selling process.
Mode 3: Brick moving arbitrage robot
However, the cryptocurrency market does not have price limits, so it is not feasible to personally monitor it 24/7 and easily miss out on profit opportunities.
In addition, purchasing cryptocurrencies or transferring funds to another exchange requires gas fees. Therefore, when calculating how much money can be earned through brick moving, these transaction fees must be taken into account. By the time the calculation is complete and the profitability is confirmed, the best timing for profit may have already passed, as cryptocurrency prices are constantly changing.
Considering this, some cryptocurrency exchange operators have introduced “brick moving arbitrage robots” suitable for beginners to automate the process of monitoring and executing trades. In simple terms, users only need to set the initial capital and expected price difference, and the brick moving arbitrage robot will automatically monitor and execute the buying on exchange A and selling on exchange B.
Advantages and risks of brick moving
Advantage 1: Diversification of capital risk
If users use a brick moving arbitrage robot to conduct trades through hedging, the robot will only execute the buying and selling arbitrage when the cryptocurrency price difference is “confirmed profitable”. In addition, the funds can be divided into two exchanges, ensuring that even if one exchange goes bankrupt, the loss will be limited to the funds in that exchange, avoiding the situation where all the capital is lost.
Advantage 2: Suitable for cryptocurrency beginners
The process and concept of brick moving arbitrage are simple, making it suitable for beginners or investors who have experience with arbitrage in traditional financial markets.
However, Zhang Hanlin advises using legal and compliant brick moving robot tools provided by reputable exchanges. This is because there are many difficulties in personally monitoring the market 24/7 and dealing with the time difference for deposits and withdrawals. Additionally, users should never trust others and hand over their funds for operation or use brick moving robots of unknown origin to avoid being scammed.
Risk 1: Cryptocurrency price fluctuations
Both fiat currency and cryptocurrencies are subject to price fluctuations. In the case of simultaneous price increases and decreases, there may be losses. Furthermore, if a stablecoin is used as the target, there is still the risk of “unpegging”. If a stablecoin experiences a major collapse, losses will be incurred.
Risk 2: Poor exchange and cryptocurrency selection
Even if there is a price difference between two exchanges, if the trading volume of the cryptocurrency one wants to brick move is very low, it may not be possible to buy or sell immediately even when placing an order. Therefore, the choice of cryptocurrency and exchange is also crucial for the success of brick moving. Additionally, some exchanges may require manual approval for deposits or withdrawals, resulting in a long processing time and missed opportunities for brick moving.
For users who want to try brick moving, using a legal and compliant brick moving robot on a reputable exchange is the safest way.
(Note: This article does not constitute any investment advice. Please carefully evaluate the risks before investing.)
Proofreading editor: Gao Jingyuan