In the crypto space, there is a more reliable way to make money than trading coins — arbitrage. It does not depend on market fluctuations but utilizes 'loopholes' such as price differences and platform rule discrepancies to achieve low buy and high sell through quantitative trading. For example: the same ETH sells for $2000 on Uniswap and $2020 on Binance, the $20 price difference is pure profit.
Author: Hunter Jin Li
Link: https://www.zhihu.com/question/1906847720766957369/answer/1916144561635431087
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1. Six Major Arbitrage Strategies Explained: From Principles to Cases
1. Cross-Platform Arbitrage
Core Logic: Capture real-time price differences between different exchanges. When BTC is priced at $29,000 on Coinbase and $29,500 on Kraken, the robot automatically buys on the low-priced platform and sells on the high-priced platform, earning $500 in a single arbitrage.
Practical Points: Use tools like CCXT to monitor real-time quotes from 200+ exchanges, set a price difference threshold of over 2% to trigger trades, and avoid profit loss due to transaction fees.
2. Triangular Arbitrage: Three-Currency Loop to Earn Exchange Rate Differences
Trading Path: ETH→USDT→BTC→ETH. Assuming ETH/USDT=2000, USDT/BTC=0.0001, BTC/ETH=2050, the product of exchange rates = 2000×0.0001×2050=410>1, completing the circular trade can yield 410 times profit (theoretical value, slippage must be deducted).
Tool Recommendation: Arbitrage Bot automatically calculates the exchange rate matrix, triggering arbitrage when the product > 1.01, eliminating the need for ordinary people to manually calculate complex formulas.
3. Perpetual Contract Funding Fee Arbitrage
Profit Logic: Perpetual contract platforms charge funding fees three times a day. When Bybit's funding rate is +0.1% (long pays short), and OKX is -0.1% (short pays long), simultaneously opening a short on Bybit and a long on OKX can earn a guaranteed 0.2% rate difference daily, with an annualized return of 73%.
Precautions: Choose platforms with sufficient liquidity to avoid losses due to positions being unable to close.
4. Futures and Spot Arbitrage: Capture the Reversion of Futures and Spot Prices
Operational Scenario: When the BTC futures price is $30,000 and the spot price is $29,000 (futures premium of $1,000), buy spot BTC and sell an equivalent futures contract, then close the position when both prices return on delivery day, earning a $1,000 price difference.
Capital Requirements: It is recommended to have initial capital ≥$100,000, while also bearing spot positions and futures margins.
5. DEX and CEX Price Difference Arbitrage
Typical Case: In May 2023, GALA was priced at $1 on Uniswap and $10 on Binance, with a price difference of 900%. The arbitrageur bought 1000 GALA on Uniswap through a smart contract while selling on Binance, netting $8900 after gas fees.
Tool Optimization: Use PancakeSwap API in conjunction with CEX interfaces to set gas fee auto-optimization parameters to avoid missing price differences due to transaction delays on-chain.
6. Stablecoin Arbitrage: Taking Advantage of Platform Interest Rates
Two Types of Play:
Deposit USDT into the Aave platform to enjoy a 4.5% annual interest rate, which is 10 times higher than bank savings;
At Curve Exchange, when the USDT/USDC exchange rate deviates by 0.5%, by utilizing the automated market maker mechanism to buy low and sell high, liquidity premiums can be earned.
2. Automation Tool List: From Free to Professional
CCXT (Open Source and Free): Supports 200+ exchange API integrations, beginners in Python programming can write simple arbitrage scripts through tutorials, suitable for the learning stage.
Binance Grid Trading (Zero Threshold): Built-in feature of the exchange, set price ranges (e.g., BTC between $25,000 - $30,000), robot automatically buys low and sells high, a beginner's first choice.
HaasOnline (Professional Level): Monthly fee starts at $500, built-in 10+ arbitrage strategy templates, no programming required, suitable for players with funds ≥$500,000.
Dune Analytics (Data Monitoring): Free to view real-time on-chain price difference data, such as the token price difference between Uniswap and SushiSwap, to discover arbitrage opportunities in advance. 3. Practical Pitfall Guide: How Ordinary People Can Avoid Detours
Capital Threshold Control: It is recommended that the amount for a single arbitrage transaction be ≥$10,000, otherwise, profits may be consumed by transaction fees (0.1%-0.2%) and on-chain gas fees ($5-$20).
Start with Simple Strategies: Beginners should first try grid trading on exchanges, and after getting familiar, advance to cross-platform arbitrage to avoid losses due to tool configuration errors.
Diversify Platform Risks: Spread funds across 3-5 top exchanges (such as Binance, Coinbase, Kraken) to prevent platform downtime or risk control issues.
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