Crypto Arbitrage

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

Just what a concept! Make 3 trades in rapid succession when you will find favorable exchange rates and voila! Profits in seconds and no connection with 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 are 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 each 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 due to anomalies in the exchanges.

Above is exactly the same kind of 3-way arbitrage with crypto arbitrage currencies.

What at first appears to be simple often is generally not.

A few 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 going to be left by having an incomplete execution (1 or 2 trades in place of 3)
• the trades should be done as a Limit-Order at the precise price identified in the arbitrage exploration (we'll try this out in a bit)
• transaction fees will start to erode the profitability of these trades (we'll examine this directly inside our code)

There's another key thing to learn about arbitrage trades but we'll enter into that once we've covered more details https://ggmoneyonline.com/academy-of-arbitrage/…

Broken triangles?

The info above proves a hint, because another line did not show exactly the same arbitrage available in 17:00:30 therefore it was gone.Had we initiated a trade for BTC it could have executed but a trade for AR mightn't have. We can't make sure with only these details.

It's possible any particular one second later the USDT / BTC exchange was no longer offered at the limit price: BTC / USDT: 0.00002973 however now that people have the BTC perhaps the rest of the 2 trades continue being possible. We just cannot know this when we initiate the arbitrage exchange.

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