Crypto Arbitrage

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

Exactly 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 utilizing a ridiculously simple bartering scenario. Once 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 every 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 as a result of anomalies in the exchanges.

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

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

A few essential items to see in the real-world of crypto markets:

  • price discrepancies between markets are anomalies, they must be sniffed out deliberately
  • once an arbitrage opportunity is found it must be executed quickly or you is likely to be left with an incomplete execution (1 or 2 trades as opposed to 3)
  • the trades should 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 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 when we've covered more details https://ggmoneyonline.com/

Broken triangles?

The info above proves a touch, because another line didn't show the identical arbitrage for sale 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 be certain with only this information.

It's possible any particular one second later the USDT / BTC exchange was no more available at the limit price: BTC / USDT: 0.00002973 however now that we have the BTC perhaps the residual 2 trades remain possible. We simply cannot know this whenever 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') isn't instantaneous, it might take another 500ms+ to go back so our total time for 3 limit orders could realistically extend out to ~2secs. Naturally there could be some inability to execute a get a handle on order as specified for the reason why that instant so you'll find so many ways an arbitrage execution may neglect to complete.

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