A Neutral Cryptocurrency Spot Hedge Across Two Exchanges

Summary

This tutorial describes a simple spot arbitrage approach across two cryptocurrency exchanges: buy on the venue with the lower price and sell on the one with the higher price when the spread is large enough to cover trading costs. It explains that the accounts should remain approximately neutral in the asset, and outlines supporting procedures for balance checks, order cancellation, depth-based pricing, and concurrent order placement. It also discusses exchange-specific amount and price precision, minimum and maximum order sizes, quote-currency conversion, fees, and taker slippage.

The proposed hedge is constrained by available inventory: an exchange may run out of quote currency or coin, preventing another paired trade until prices or balances change. A balancing routine uses account and order-book data to reduce inventory differences. The article is a design tutorial with code excerpts, not a performance study; it reports no returns, costs, or execution-quality measurements. It does not establish that simultaneous orders will fill together, so partial fills, latency, and changing spreads remain material risks.

Key ideas

• The strategy buys on the cheaper exchange and sells on the more expensive one when the spread clears a cost threshold.
• It aims to keep coin holdings across accounts neutral through periodic balance checks and corrective trades.
• Order sizing must account for exchange precision, minimums, available depth, and maximum practical trade size.
• Fees, slippage, quote-currency conversion, and unfilled orders affect whether a spread is profitable.
• Inventory constraints and asynchronous fills can interrupt hedging, and the tutorial provides no performance evidence.

Tags

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