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 find favorable exchange rates and voila! Profits in seconds and no connection with volatility.

How does this work?

Let's break this down utilizing a ridiculously simple bartering scenario. Once 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 each mango

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

She has profited 2 almonds through these trades due to anomalies in the exchanges.

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

What in the beginning appears to be simple often is often not.

Several essential what 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 with an incomplete execution (1 or 2 trades instead of 3)
• the trades must be done as a Limit-Order at the particular price identified in the arbitrage exploration (we'll try this out in a bit)
• transaction fees will quickly erode the profitability of the trades (we'll examine this directly in our code)

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

Broken triangles?

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

It's possible any particular one second later the USDT / BTC exchange was no further offered at the limit price: BTC / USDT: 0.00002973 however now that we have the BTC perhaps the remainder 2 trades continue to be possible. We simply cannot know this whenever we initiate the arbitrage exchange.

Each Binance REST API call takes at the very least 200ms, in accordance with where we're located (where your code is running). Binance servers is found in Japan. A limit order (a ‘Taker') isn't 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.