What I Have Learned from My Arbitrage Experiences with Cryptoassets | Hacker News Reader

What I Have Learned from My Arbitrage Experiences with Cryptoassets

blog.coinfabrik.com

36 pointswslh13 comments

Wallet "under maintenance". Yeah, right.

If that happens regularly, you have to assume the "exchange" is front-running, trading for their own account ahead of customer trades.

Well if you believe this we can go the extra step and assume that the exchange is _causing_ the wallet "maintenances" to run up the price of a coin they want to sell to their customers.

>Well if you believe this we can go the extra step and assume that the exchange is _causing_ the wallet "maintenances" to run up the price of a coin they want to sell to their customers.

This isn't hard to believe at all. In fact that sounds like a pretty tame level of scamming for the crypto world.

And we can go a step further yet by assuming that the reason they want to sell that going to their customer is that they're buying it elsewhere. They're doing the arbitrage.

Crypto "exchanges" have a long history of being difficult about withdrawals. Search for "bitcoin withdrawal problems".

Malicious intent is absolutely a possibility but I think you'd be surprised at the amount of exchanges running off the regular consumer wallets (such as bitcoind and altcoin equivalents). These pieces of software are not meant to support the massive amount of transactions that exchanges see and do actually need quite a bit of maintenance to keep operating well. The industry is still in an infancy stage and the tools we are all using tends to reflect that more than anything.

Have you tried doing any arbitrage on any of the DEX out there (the only one I have experience with is the Stellar DEX).

If you manage the offers yourself (rather than going through some client) there are no exchange fees, and the transactions are nearly instant.

There could be two approaches to it:

1) Find pairs/paths within the order book that can make a profit. There's practically no fees here so I suspect the margins will be pretty thin.

2) Use "anchors" to convert your Stellar assets back into the real cryptocurrency, and then deposit again them via another anchor (or exchange) and complete your trade.

DEX could be a good idea. However, I've tried something without success. In waves, for example, you can sell btc for USD tokens with good profit, but you can not extract them. When exchanging with other ctyptos there is no high volume, then I've found bid / ask prices with high spread.

well to be fair arbitrage in traditional markets only really works at massive scale.

Its also part of the invisible hand that brings equilibrium to markets. Unfortunately its not really accessible to the average investor.

What do you mean on a large scale? in cytpo eschanges, large orders only lead you to pay too expensive (or sell too cheap)

Building a sustainable arbitrage business requires scale. Margins are thin and should always be getting thinner, so to remain viable, you have to pursue ever more exotic arbitrage opportunities. Arbitrage opportunities encourage a speed race, and the way to win that race is to use ever-increasing resources to elbow out competition and discourage newcomers.

Usually a currency arbitrage opportunity provides a fraction of a percent in gains, like .1% max. So, you need massive amount of capital to actually make a reasonable profit. You would think why risk huge amount of money for small profit, but because the markets are established the risk is nil. As traders act on the open opportunities markets become more efficient, eg the spread shrinks, and the opportunity quickly dissapears.

A variable transaction cost works against you.

Well at least the ccxt library[1] the author uses makes crypto trading accessible to the average developer along with his code snippets

https://github.com/ccxt/ccxt

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