Cross-Exchange Cryptocurrency Arbitrage and Lead-Lag Execution Risks
Summary
The article explains cross-exchange cryptocurrency arbitrage based on temporary price differences. It proposes monitoring executable bid and ask prices, buying where the asset is cheaper and selling where it is dearer, then closing when the spread narrows. It emphasizes comparing opportunities with historical spreads and accounting for fees, slippage, price impact, and the time spent waiting. An illustrative automation example is included, but the author says it is not production-ready.
The discussion covers practical obstacles: spreads may be too small, observed prices may differ from fills, one side may execute without the other, and balances can become concentrated on one exchange. Suggested responses include maker orders, broader venue and asset coverage, faster market data and execution, stop-losses for unhedged exposure, and transferring funds or waiting for spreads to change. Despite describing potential profits, this is not risk-free: execution failures, latency, fees, and transfer constraints can erase an apparent spread. The article does not provide measured results or a validated live strategy.
Key ideas
- Cross-exchange arbitrage seeks to trade opposing sides of a temporary price gap.
- Executable bid and ask prices, fees, slippage, and market impact matter more than indicative spreads.
- Latency and one-sided fills can leave the trader with unwanted directional exposure.
- Maker execution and broader venue coverage may help find or capture opportunities, with added tradeoffs.
- The example is illustrative and does not establish stable or risk-free profitability.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.