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I receive a lot of questions from people who want to hear hard numbers about what kind of yield you can get with an arbitrage strategy. There are so many different options for how you run your strategy, but the math is actually pretty basic to calculate yourself. If you're unfamiliar with arbitrage or bitcoin arbitrage, start here first. Let's pick two arbitrary numbers and analyze what might happen with that scenario.
Here's the order of events the automated trading bot would execute:. This is a 3. There are withdrawal and deposit fees when moving around USD or other currencies other than bitcoin, which severely lowers the profit level available. You should account for those fees in your net profit calculation. This is not a factual value and the truth is that arbitrage opportunity fluctuates with volatility. I encourage you to peer into the data yourself and come to your own conclusions.
Calculating Bitcoin Arbitrage Profit posted over 4 years ago - 3 min read I receive a lot of questions from people who want to hear hard numbers about what kind of yield you can get with an arbitrage strategy. There are two variables that matter in an arbitrage strategy: This is the minimum percentage price difference between exchanges for conducting arbitrage.
A higher cutoff will result in higher profit per trade, but will occur more rarely. The volume of currency you wish to trade during every arbitrage trade. This is largely based off how much you wish to invest. Here's how you'd get started: Deposit some number of USD or other currency into the lower-priced exchange. Let's use btc-e for this example, as it often has very low prices. Deposit only the amount you need to mitigate block chain confirmation time into the higher exchange, which we'll say is MtGox.
Because our hypothetical bot only scrapes once every 10 minutes, there is a very low chance that we'll trade more than once an hour. That means we only need to deposit 0. Here's the order of events the automated trading bot would execute: Using the compound interest formula: The great thing about this formula is you can tweak the numbers yourself.
Caveats There are withdrawal and deposit fees when moving around USD or other currencies other than bitcoin, which severely lowers the profit level available.