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 employing a ridiculously simple bartering scenario. When we exchange one crypto-currency for another we're bartering or exchanging fungible assets.

Let's image the following 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 as a result of anomalies in the exchanges.

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

What in the beginning seems to be simple often is usually not.

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

• price discrepancies between markets are anomalies, they need to be sniffed out deliberately
• once an arbitrage opportunity is available it must be executed rapidly or you will end up left with an incomplete execution (1 or 2 trades as opposed to 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 begin to 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 get into that after we've covered more details https://www.scamrisk.com/crypto-arbitrage/…

Broken triangles?

The data above proves a hint, because the next line did not show exactly the same arbitrage obtainable in 17:00:30 therefore it was gone.Had we initiated a trade for BTC it will have executed but then the trade for AR might not have. We cannot be sure with only this information.

It's possible this 1 second later the USDT / BTC exchange was no longer available at the limit price: BTC / USDT: 0.00002973 however now that we have the BTC perhaps the remaining 2 trades are still possible. We just cannot know this once we initiate the arbitrage exchange.

Each Binance REST API call takes at least 200ms, based on where we're located (where your code is running). Binance servers are observed in Japan. A control order (a ‘Taker') is not instantaneous, it may take another 500ms+ to go back so our total time for 3 limit orders could realistically extend out to ~2secs. Needless to say there could be some inability to execute a control order as specified for the reason that instant so there are numerous ways an arbitrage execution may neglect to complete.