With the start of the bitcoin fever, countless interesting projects appeared on the Internet, ranging from ICOs, cloud mining to vlogs and courses on trading, mining, etc. I paid attention to crypto arbitrage, which we will talk about now.
For a long time, I looked closely at this topic, read many articles, did not believe, doubted, then was inspired, and finally, I realized if I don’t try, I won’t find out.
There are many strategies, but for myself, I divided arbitrage into two branches: intra-exchange (three-legged) and inter-exchange (spatial) arbitrage Cryptocurrency.
This article was written back in 2018 and only now have I found it and decided to share it. Therefore, do not judge strictly if some information is irrelevant.
This strategy is implemented on one specific exchange and looks something like this.
Let’s say we have BTC, we sell them for dollars, we buy LTC for these dollars, and then we change LTC for BTC – we get a profit in BTC. Since people move the price, there is always some kind of gap on which you can earn. If you multiply all prices, ideally you should get 1, and you can earn on any deviation from unity by passing through the triangle clockwise or counterclockwise. It doesn’t have to be three currencies, there can be any number of them Cryptocurrency.
It looks confusing in words, let’s look at a specific example in numbers, close to the common man. Let’s take the three Dollar-Euro-Pound Cryptocurrency.
Dollar-Euro – 0.9
Euro Pound – 0.8
Pound-Dollar – 1.3
0.9 * 0.8 * 1.3 = 0.93
Often, the final result is less than one, that is, after completing all transactions, we will get fewer coins than it was originally. But if we go in the opposite direction, then the coefficients will be inversely proportional.
1/0.9 * 1/0.8 * 1/1.3 = 1.07
The situation is further complicated by the fact that we pay a commission for each operation. And for three transactions, we will pay a triple commission.
There are many GitHub bots, free and paid, looking for arbitrage opportunities and making deals. Such programs either do not inspire confidence or do not meet the requirements. In general, I decided to do everything myself and check. Used the ccxt library. To begin with, I took one triple, and every few seconds I checked whether there was an opportunity for arbitrage and indeed there were such opportunities, but I could not fully appreciate the picture. So I add a few more triplets. Even tried to trade. Soon I decided to remake the bot, added a web interface to it, connected other exchanges. I started scanning each one in turn looking for arbitrage situations. But no matter how hard I tried, I couldn’t trade. If there is an arbitrage situation, then in a second, a maximum of two, it is gone.