Arbitrage Process

A brief description of the process

Inter-exchange arbitrage is a trading strategy that is based on the price difference of the same asset(s) on various exchanges. Arbitrage opportunities take advantage of the inefficiencies of the market, for example, in the backlog of the reaction of certain exchanges to a drastic change in the value of an asset, or a big difference in spread at different exchanges. In addition, arbitrage opportunities open
up in the event of a price difference on an asset obtained through a chain of purchases and sales via intermediate assets. In this case, the difference in prices during the passage of the entire chain accumulates and becomes a significantamount, which can reach up to 1-3% on the crypto-currency market. Such arbitrage opportunities exist for a very short time, and a trader who bids using arbitrage strategies is constantly searching for them.

Realization of Arbitrage Opportunities

The process of implementing arbitrage strategies is complex and requires the following to achieve a stable and positive result:
1. Having deposits on several leading exchanges (the more sites are covered, the better).
2. Availability of specialized software that monitors arbitrage opportunities.
3. Having specific hardware (specially allocated and properly configured servers, with a minimum ping, etc.) and software that integrates exchanges interacting with them.

ARBIDEX eases the process of arbitrage opportunities realization by acting as the provider of the above-mentioned points that are necessary to achieve the result when implementing arbitrage strategies. ARBIDEX algorithm is engaged in a permanent search for arbitrage chains between exchanges that users can themselves implement with the help of ARBIDEX technical solution. ABX tokens solely allow to access the automated execution of arbitrage strategies, the profit then made has no influence on the value of the token as it solely functions as the means of access.

Below is an example of two arbitrage chains implemented in the automatic mode deploying ARBIDEX MVP platform:

In this example, the BTC-> ETH-> ETC-> BTC exchange sequence was implemented, and the total profit from this transaction amounted to 0.827%, i.e. as a result of this exchange chain, the amount of BTC increased by ~ 0.8% compared to those sent to the chain in just seconds. The profit in this example occurred from a small difference in asset prices relative to each other. Over 3 exchange iterations this difference accumulated and became equal to ~ 0.8%. It is important to note that during each trading iteration there are a lot of arbitrage opportunities with different capacities, including significantly greater capacity (the ability to put more funds through this chain).

The question arises — what is the capacity of the arbitrage opportunities? What amount of funds is needed to reduce the profitability of this activity to the amount ofcommissions for orders execution? These questions do not have a simple answer, asit requires confidence in fixing all the chains at all the exchanges. Such a guarantee cannot be provided by any software (as well as the fact that there was the chain that had time to be traded out until the software found it). The trend of the market is thefollowing: the number of crypto-exchanges and cryptoassets is constantly growing and this growth is much faster than the inflow of new funds to the market. As a result,
the arbitrage market will expand and the availability of an automated mechanism for searching and executing such opportunities is an excellent chance for low-risk earnings on a volatile crypto-market.

Last Updated On June 01, 2018