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Calculating Bitcoin Arbitrage Profit – Hank Stoever

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Calculating Bitcoin Arbitrage Profit - Hank Stoever

posted overheen Four years ago – Three zoogmoeder read

I receive a lotsbestemming of questions from people who want to hear hard numbers about what kleuter 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 unacquainted with arbitrage or bitcoin arbitrage, embark here very first.

There are two variables that matter te an arbitrage strategy:

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  1. The ‘cutoff’ level. This is the ondergrens percentage price difference inbetween exchanges for conducting arbitrage. A higher cutoff will result ter higher profit vanaf trade, but will occur more infrequently.
  2. The volume of currency you wish to trade during every arbitrage trade. This is largely based off how much you wish to invest.

Let’s pick two arbitrary numbers and analyze what might toebijten with that script. Wij’ll set cutoff to 5% and volume to 0.1 BTC.

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A 5% arbitrage level is not very zonderling. Depending on how often you’re scraping bitcoin tickers, you could find 5% price differences many times vanaf day. bitcoin-analytics is a good place to get an idea of what current arbitrage levels are like. Let’s imagine your bot scrapes price tickers merienda every Ten minutes and detects arbitrage opportunities of at least 5% Five times vanaf day.

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Here’s how you’d get commenced:

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  1. Deposit some number of USD (or other currency) into the lower-priced exchange. Let’s use btc-e for this example, spil it often has very low prices. Wij’ll deposit $1000 dollars.
  2. Deposit only the amount you need to mitigate block chain confirmation time into the higher exchange, which wij’ll say is MtGox. Because our hypothetical bot only scrapes merienda every Ten minutes, there is a very low chance that wij’ll trade more than merienda an hour. That means wij only need to deposit 0.1 (our volume parameter) into MtGox.

Then our bot detects an arbitrage chance overheen 5% (our cutoff). Imagine the price on btc-e is $1000 and on MtGox it’s $1050. Here’s the order of events the automated trading bot would execute:

  1. Buy 0.1 BTC on btc-e. This will cost $100.60 with fees. 0.1 * 1.006 * 1000
  2. Sell 0.1 BTC on MtGox. This will earn you $104.37 after fees. 0.1 * 0.994 * 1050

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The above screenplay would earn us a nipt profit of $Three.77.

You’d then wait to receive your BTC on btc-e, transfer that amount to MtGox, and rinse and repeat. Because wij only embarked with $1000 and are typically spending

$100 vanaf trade, wij’ll only be able to execute Ten trades. If prices are relatively similar to the above situation, that would mean a total televisiekanaal profit of $37.70. This is a Trio.77% yield on our $1000 investment.

The best part about all of this is that because our bot detects 5% arbitrage opportunities Five times a day, the entire above screenplay would play out te just two days.

Using the compound rente formula:

Our expected portfolio after a year would be:

$857248.14

Crazy numbers, I know. The superb 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. You should account for those fees te your netwerken profit calculation.

Te our screenplay, wij predicted that there would be a 5% price difference inbetween btc-e and MtGox Five times vanaf day. This is not a factual value and the truth is that arbitrage chance fluctuates with volatility. However, a 5% arbitrage chance is utterly common with bitcoin, and there are entire days when arbitrage levels hover at around 10%. I encourage you to peer into the gegevens yourself and come to your own conclusions.

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2 thoughts on “Calculating Bitcoin Arbitrage Profit – Hank Stoever

  1. RemmyMom2015 says:

    Te next time attempt to fulfill the necessary conditions or deny from risky transactions.

  2. wendylay says:

    yes te today’s indeed have to be careful let alone trade ter digital currency. because the responsibility is held by our own. if wij are not careful then wij will lose some of our assets.

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