Crypto Arbitrage

Exploring the so-called ‘3-way arbitrage'trading strategy on Binance crypto currencies. Is this hype or is it profitable?

What a concept! Make 3 trades in rapid succession when you find favorable exchange rates and voila! Profits in seconds and no experience of volatility.

How does this work?

Let's break this down employing a ridiculously simple bartering scenario. Whenever we exchange one crypto-currency for another we're bartering or exchanging fungible assets.

Let's image these scenario:

• Jane has 10 almonds
• Will has pineapples and will trade each for 5 almonds
• Christine has mangoes and will trade evenly for a pineapple
• Xavier has almonds and will trade 6 for every single mango

So in this arbitrage opportunity, Jane trades 10 almonds for 2 pineapples, and these for 2 mangoes which then she trades for 12 almonds.

She has profited 2 almonds through these trades because of anomalies in the exchanges.

Above is a similar form of 3-way arbitrage with crypto arbitrage currencies.

What at first seems to be simple often is often not.

A couple of essential things to see in the real-world of crypto markets:

• price discrepancies between markets are anomalies, they have to be sniffed out deliberately
• once an arbitrage opportunity is located it must be executed quickly or you is likely to be left with an incomplete execution (1 or 2 trades rather than 3)
• the trades must certanly be done as a Limit-Order at the specific price identified in the arbitrage exploration (we'll try this out in a bit)
• transaction fees will quickly erode the profitability of these trades (we'll examine this directly in our code)

There's another key thing to know about arbitrage trades but we'll enter into that once we've covered more details…

Broken triangles?

The data above proves a touch, because another line did not show a similar arbitrage for sale in 17:00:30 therefore it was gone.Had we initiated a trade for BTC it may have executed but then a trade for AR might not have. We can't be sure with only these records.

It's possible any particular one second later the USDT / BTC exchange was no more offered by the limit price: BTC / USDT: 0.00002973 however now that we have the BTC perhaps the rest of the 2 trades remain possible. We just cannot know this whenever we initiate the arbitrage exchange.

Each Binance REST API call takes at the least 200ms, according to where we're located (where your code is running). Binance servers are available in Japan. A limit order (a ‘Taker') isn't instantaneous, it usually takes another 500ms+ to come back so our total time for 3 limit orders could realistically extend out to ~2secs. Needless to say there may be some inability to execute a get a grip on order as specified for the reason that instant so you'll find so many ways an arbitrage execution may don't complete https://ggmoneyonline.com/academy-of-arbitrage/.