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Blackbird: Bitcoin arbitrage

(github.com)
298 points vega_empire | 4 comments | 23 Dec 17 12:39 UTC | HN request time: 0.751s | source
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eriktrautman ◴[23 Dec 17 15:47 UTC] No.15994566[source]▶
Two notes. First, as others have said, while the market may contain inefficiencies, they tend to close fast especially with a public solution. That said, this may be a good starting point for you to go nuts on for generation 2.0 so enjoy the code.

Second, while I won’t comment on this particular strategy, I want to note that many so-called “arbitrage” systems are actually sleeves for another important risk: liquidity. These strategies typically assume normal trading behavior and don’t take into account that exchanges break during crisis events, the exact events (even if they’re rare “black swans”) which can leave you half in a trade and wearing massive exposure during extreme volatility. The analogy is picking up nickels before a bulldozer... use at your own risk.

replies(2): >>15995536 #>>15997273 #
1. mdgrech23 ◴[23 Dec 17 18:40 UTC] No.15995536[source]▶
huh, you give an analogy w/ out actually explaining how this would happen.
replies(2): >>15995638 #>>15995645 #
2. sb8244 ◴[23 Dec 17 18:59 UTC] No.15995638[source]▶
I think that poster does explain how it happens. The exchanges tend to shut down or break during extreme volatility events. If one breaks and the other doesn't, you're half in the market. What if you can't sell your positions until after the price drops, but the other position doesn't exist to balance it out?
replies(1): >>15996160 #
3. nmat ◴[23 Dec 17 19:00 UTC] No.15995645[source]▶
I thought it was pretty clear. In a high traffic scenario some exchanges break and your order doesn't go in. To profit from this system you need both orders to be posted almost at the same time. If one exchange lags for minutes/hours you risk losing money with your other position, ie, you get bulldozed.
4. nugget ◴[23 Dec 17 20:40 UTC] No.15996160[source]▶
With cryptocurrencies you also have other exchange risks, notably the risk an exchange is hacked or otherwise goes out of business. Imagine if you had been buying BTC on Coinbase and selling BTC on MtGox in 2013, making a great profit (on paper) through arbitrage, until MtGox tanked and all those profits were frozen.