[nlperguiy]

It's nice to do that to banks that didn't set their trading prices to avoid arbitrage (did it couple of times myself).

For cryptocoins it's nearly impossible. Because in most cases there's no idea when the actual transfer will be executed (if arbitraging between exchanges).

[im3w1l]

The trick is to have the currencies already there so you dont need to do a transfer (well you will want to do one afterwards to get ready for another round, but it isnt that time sensitive).

[chatmasta]

That just pushes the problem to the next trade. Even if you diligently keep your accounts funded, you’ll need to rebalance them after most trades (by definition of arbitrage), so your velocity will eventually be limited.

Concretely, imagine if every ten minutes you made an arbitrage buy on GDAX, and sell on BitFinex. As long as GDAX remains the “buy side” of the arbitrage, you will need to keep refilling your fiat funds at GDAX. You could “keep it filled,” but this becomes more unsustainable as you deplete your bankroll. You will eventually need to rebalance which will affect your velocity.

Disclaimer: I am not a financial professional.

[hrmm1231321]

Not entirely true. If you wait for the arbitrage opportunity to occur in the reverse direction, you can rebalance. But you take the risk of waiting days/weeks for a reverse dip opportunity.

Source: I tried to make money arbitraging BTC back in 2015. I made a 2x return, entirely because of inflation, realized I didn't understand anything I was doing and pulled my 8k out. If only I had kept it in :)

[chatmasta]

I would expect that the same exchanges tend to be on the same side of arbitrage spreads, for various reasons that could include lack of liquidity.

[hrmm1231321]

If you plot them, you will see the spreads intersect now and then.

However, all the same risks apply e.g. with orders not being processed enough.

[gruez]

it's still a better situation compared to the one posed by the parent. at least now the profits are guaranteed (barring an exchange hack).

[dnautics]

You could get completely hammered if one of the exchanges goes down temporarily helfway through your arbitrage

[nlperguiy]

Yep, I've tried to do arbitrage on one exchange during dumps (there's quite a lovely way to realize there will be a massive dump done on the exchange) and most of my trades couldn't even execute because the trading engine can't meet the demand.

When you look at the price history (and open orders history) between some pairs on one exchange you'll find that during these spikes there was no arbitrage being done at all.

One example is seeing the price on ETH-BTC pair being constant despite BTC dropping 10-20%, and then combing back in 5-10 minutes.

[neffy]

I rather suspect if it was possible to arbitrage the crypto´s, then we wouldn´t be seeing these kinds of fluctuations.

[dmichulke]

While I mostly agree with your take, there is always that joke that reminds me it's not true:

Two economists walk down the road.

E1: look, a 100$ bill over there!

E2: if it were one, somebody would have picked it up already!

E1: nods

[qubex]

The elevated chance of an exchange going down in the middle of a crisis is actually a major source of the risk that one needs to take into account when evaluating the expected profitability of arbitrage strategies.