Market Arbitrage
In this article, we explain what Market Arbitrage is and how it works.
What is Market Arbitrage?#
Market Arbitrage profits from price differences between pairs on one exchange. It is possible due to market inefficiencies and disappears in perfectly efficient markets. Take advantage of the supply and demand differences in pairs without needing to withdraw funds from the exchange.
How does Market Arbitrage work?#
Your bot will try to increase the quote currency. It will do this by taking advantage of price differences between the currencies available on your exchange. It will make three trades to increase the amount of your quote currency. Market Arbitrage works best on exchanges with lower trading volumes.
See how Market Arbitrage works in practice on Cryptohopper: You have BTC as a quote currency. The bot has found a Market Arbitrage opportunity that includes the coins ETH and LTC:
- It will buy 48 ETH with 1 BTC on the exchange (sell BTC).
- The 48 ETH the bot has just bought is used to buy 153 LTC.
- You buy back 1.005 BTC with the 152 LTC. Completing the Market Arbitrage and increasing the amount of BTC on your exchange.
