A Multi-Exchange Spot Hedging Strategy for Crypto Arbitrage

Summary

This annotated educational strategy describes hedging cryptocurrency spot exposure across multiple exchanges. It aims to exploit price differences by buying on the venue with the lower effective price and selling on the venue with the higher effective price, while keeping funds distributed across venues instead of transferring coins during each opportunity. The code collects balances and quotes, adjusts prices for fees, checks minimum order sizes and price bounds, and tracks changes in aggregate holdings.

The implementation also describes order cancellation, account rebalancing, and placing paired buy and sell orders with a configurable price offset and trade size. The document presents this as a basic programming example and says it has room for improvement. It offers no measured returns or rigorous risk analysis; exchange fees, execution failures, latency, liquidity, and inventory imbalances can undermine apparent spreads, so the example does not establish a stable arbitrage profit.

Key ideas

• The strategy seeks to buy on a cheaper exchange and sell on a more expensive exchange.
• It estimates effective quotes after accounting for exchange fees.
• It checks balances, price bounds, minimum trade sizes, and open orders while managing inventory.
• Paired orders use configurable sizing and price offsets, but execution on one venue may not ensure execution on the other.
• The article is an introductory code example without backtest results or a full treatment of execution risk.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.