The automated equity-split cryptocurrency arbitrage strategy

Abstract

Cryptocurrency prices frequently fluctuate, which creates price differences in each market. The price gap presents an excellent opportunity for arbitrage in cryptocurrency markets. Arbitrage occurs when a token is purchased in one market and simultaneously sold in another market for a higher price. This paper proposes the arbitrage strategy with automated equity-split cryptocurrency between the largest market and the Thai market. We program the algorithm to match order books with a fee deduction for capturing an investment position size. A suitable threshold helps prevent investment losses from other factors, such as execution risk or price slippages. The strategy is proven by verifying it with a calculated trade compared to actual execution at targeted markets. The strategy is examined in terms of profitability, accuracy, and utility. It could generate high profits in the long run. It incorporates hedging to produce approximately 225.32% APY (of $22,500 port size) without price risk. The system has positive errors, which induce more profits than the predicted results. The strategy requires automation to maximize a profit, which is infeasible with manual execution. Eventually, the proposed system achieves all aspects of the analysis.

Keywords

• cryptocurrency
• arbitrage
• strategy
• equity
• market