Are arbitrage margins as good as they seem?

[Leinaded]

Hi all,

I wanted to make an open question for those of you actively doing arbitrage. First of all for those of you that feel the "urge" to mention arbitrage has been discussed in many threads and "just do a search" I say that it's been discussed but never with the specificity I'm looking for so I'm opening this thread to make specific questions and try to understand the answers with an example that illustrate better what my doubts are.
I've been interested in getting into arbitrage but the subtleties and nuances can make the theory very different from practice and the estimated profits much less than calculated.
I would like to know with an specific example how would you calculate the profit (reward) versus the risk (initial investment, potential of missing the trade) after taken into account several things:

• Spread and fees asked at both exchanges.(Including trades and transaction between them).
• Cost of exchanging EUR to USD or any other currency since afaik all deposits must be done in USD. Does this step makes you incur in adittional fees and increased time to perform the trades and deposits you want to do?
• Estimated time to do all the steps needed to do arbitrage reliably and do not miss too many opportunities so you can have an acceptable risk/reward ratio. (Risk of missing the trade versus potential profit).

As a help for me to understand how you estimate risk/reward let me introduce and example and if you want to help complete it with what you'd calculate to estimate time frame, risk, and net profit with all the spreads, fees, etc. deducted.
Let's pick BTC/EUR which has huge spreads between exchanges:

Cryptsy     261
   Buy offer 3.5 BTC
BTC-e        198.18
   Sell offer 4.25 BTC

Gross profit 62.82 per BTC. Gross risk up to 693.63 EUR, potential gross profit 219.87 EUR. 131.7% Gross ROI.

So what is the net profit, time estimates of all the required steps in this arbitrage trade and how many trades you achieve versus the ones you miss per 20 (pick any number) trades you begin? Any other thing I forgot to ask that you think is important will be welcome.

I'd appreciate any help you can provide, most of all if it is as specific as possible. Is not the same to say "yeah, it has been somewhat profitable for me but is has gotten harder" than answer with the detail I ask above.

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[Serpens66]

Just try it and report back.

Usually it is of course not possible to make such a profit. So you have to find out, what the problem is.
At btce the problem is, that there are very high deposit fees.
I don't know the problem at cryptsy, but obviously it is a very big problem and everyone should be very careful with EUR trades at cryptsy.

edit:
I asked BitJohn. There is currently no withdraw option for EUR available

[RodeoX]

No. 

The price is not the only thing to look at. You need to take into account the various fees, volume, etc. You also should consider your effort in acquiring foreign currencies and setting up multiple accounts at exchanges. You are also, arguably, doubbling your risk of fraud when you use two exchanges.

To be successful you will likely need to go big because you may only make pocket change per bitcoin. Still, it is a good learning experience.

[Mickeyb]

Hi,

No, not really. Arbitrage is much harder than it seems with Bitcoin. Take a look at this thread and my yesterday's post about the same question.

https://bitcointalk.org/index.php?topic=1180921.msg12426472#msg12426472

Cheers!

[itod]

You can do quickly check this yourself by making a simple Excel table with one arbitrage example. Be sure you include every single fee exchanges are calculating on you, so one complete arbitrage circle would have up to ten columns in Excel. If you are arbitraging with altcoins and not fiat make sure you get fees right, they can vary much from one exchange to another.

When you have done all that notice the liquidity of the exchanges, sometimes it's so low that any attempt to exploit the arbitrage is impossible because it would break the current price.

Last but not least, try moving some coins between the exchanges before you try arbitrage with larger sums, you will find out that some exchanges are notoriously slow or require long confirmation times, or even manual confirmation for some altcoins.

[maccd123]

Hi all,

I wanted to make an open question for those of you actively doing arbitrage. First of all for those of you that feel the "urge" to mention arbitrage has been discussed in many threads and "just do a search" I say that it's been discussed but never with the specificity I'm looking for so I'm opening this thread to make specific questions and try to understand the answers with an example that illustrate better what my doubts are.
I've been interested in getting into arbitrage but the subtleties and nuances can make the theory very different from practice and the estimated profits much less than calculated.
I would like to know with an specific example how would you calculate the profit (reward) versus the risk (initial investment, potential of missing the trade) after taken into account several things:

• Spread and fees asked at both exchanges.(Including trades and transaction between them).
• Cost of exchanging EUR to USD or any other currency since afaik all deposits must be done in USD. Does this step makes you incur in adittional fees and increased time to perform the trades and deposits you want to do?
• Estimated time to do all the steps needed to do arbitrage reliably and do not miss too many opportunities so you can have an acceptable risk/reward ratio. (Risk of missing the trade versus potential profit).

As a help for me to understand how you estimate risk/reward let me introduce and example and if you want to help complete it with what you'd calculate to estimate time frame, risk, and net profit with all the spreads, fees, etc. deducted.
Let's pick BTC/EUR which has huge spreads between exchanges:

Cryptsy     261
   Buy offer 3.5 BTC
BTC-e        198.18
   Sell offer 4.25 BTC

Gross profit 62.82 per BTC. Gross risk up to 693.63 EUR, potential gross profit 219.87 EUR. 131.7% Gross ROI.

So what is the net profit, time estimates of all the required steps in this arbitrage trade and how many trades you achieve versus the ones you miss per 20 (pick any number) trades you begin? Any other thing I forgot to ask that you think is important will be welcome.

I'd appreciate any help you can provide, most of all if it is as specific as possible. Is not the same to say "yeah, it has been somewhat profitable for me but is has gotten harder" than answer with the detail I ask above.

The one below seems to be a good arbitrage margin, but it is not high as the one you mentioned.
This one is 4% and the one you mentioned is around ~25% so you can give it a try with that high number.

Until 30/09/2015 there will be 4% boost for all BITCOIN to USD trades.
Each trade is processed through Virtual World Services so it complies with paypal's policy.

The boost link is: https://www.bitcoinltd.net/index.php?bonuscode=4%

Contact for GBP or EUR request: support@bitcoinltd.net
Technical contact: admin@bitcoinltd.net

Current normal price (at 12:54 AM CET TIME):


Current boosted price (at 12:54 AM CET TIME):

[Leinaded]

Just try it and report back.

Usually it is of course not possible to make such a profit. So you have to find out, what the problem is.
At btce the problem is, that there are very high deposit fees.
I don't know the problem at cryptsy, but obviously it is a very big problem and everyone should be very careful with EUR trades at cryptsy.

edit:
I asked BitJohn. There is currently no withdraw option for EUR available

Thanks for your answer Serp. That's what I was interested in when I asked the question. Usually there are hidden fees and details that make the trade unprofitable like those high deposit fees you mentioned that you only realize when you actually make the trade. It would be nice if you could post those fees to calculate/estimate the net profit. Since I do not have an account at btc-e I can only know the transaction fees there 0.2%. So if you have an account there could you share all the fees that they have? At Cryptsy I have an account and even now I'm still very unsure of their fees if I'd withdraw from them or make a transaction how many hours it would take so someone who has had an account at btc-e for some time would be helpful.

About the problem of not being able to withdraw in EUR it could be solved exchanging it for USD. The actual ratio is 0.94 so that gross profit of 219.87 EUR can be withdraw as 206.7 USD which is still a nice profit. What I'm more interested to know are all the fees you have to take into account between both exchanges so I can make a good estimation of the net profit without having to try it myself and fill all the dox in both exchanges. Call me lazy but I don't want to make all that hassle to finally realizing the profit margin is so low and the risk (of missing the trade) so high that I better keep trading cryptocurrencies only and not do arbitrage verifying several accounts in different exchanges.

P. S. Btw tnx for the cointracker tool on your signature. I just signed up and seems a very useful tool for my trades. Let's see how it helps me to keep a good track of them.

[maokoto]

Yes, fees suck. Only for regular trading, you need to have an excell sheet or something to calculate the real price you are paying in trades.

[worhiper_-_]

Old post, but you guys should have a look at this website. http://orderbook.info/

Basic design but Very useful

[Serpens66]

Thanks for your answer Serp. That's what I was interested in when I asked the question. Usually there are hidden fees and details that make the trade unprofitable like those high deposit fees you mentioned that you only realize when you actually make the trade. It would be nice if you could post those fees to calculate/estimate the net profit. Since I do not have an account at btc-e I can only know the transaction fees there 0.2%. So if you have an account there could you share all the fees that they have? At Cryptsy I have an account and even now I'm still very unsure of their fees if I'd withdraw from them or make a transaction how many hours it would take so someone who has had an account at btc-e for some time would be helpful.

About the problem of not being able to withdraw in EUR it could be solved exchanging it for USD. The actual ratio is 0.94 so that gross profit of 219.87 EUR can be withdraw as 206.7 USD which is still a nice profit. What I'm more interested to know are all the fees you have to take into account between both exchanges so I can make a good estimation of the net profit without having to try it myself and fill all the dox in both exchanges. Call me lazy but I don't want to make all that hassle to finally realizing the profit margin is so low and the risk (of missing the trade) so high that I better keep trading cryptocurrencies only and not do arbitrage verifying several accounts in different exchanges.

P. S. Btw tnx for the cointracker tool on your signature. I just signed up and seems a very useful tool for my trades. Let's see how it helps me to keep a good track of them.

Good to know that my answer helped =)

In this thread you can see some information about alot of exchanges:
https://bitcointalk.org/index.php?topic=695082.0

But btc-e changes their fee very very often, so it's not up to date in this thread.

Creating an account at btc-e is not much work =P You don't need verification to see the fees
The verification process at btc-e, which is needed for bank transfers, is a pain. Just search for "btc-e money on hold"  
You don't need a verification if you use a verified OKPAY account. At the moment the fee btc-e chareges for an OKPAY deposit is 2% . OKPAY itself charges 1.5% but with a maximum of 3€.  But it got expensive to deposit money to OKPAY. Some months ago it was free to deposit via bank transfer. Now they charge a fee. I don't remember the exact number, but it was also something about 2%.  So with OKPAY it will be up to 5.5% fee for depositing at btc-e for smal amounts, and about 4% for big amounts (when you can leave out the 3€ fixed fee).

You see, it is very complicated and with alot of hidden high fees    

[Lazada]

arbitrage is not as easy as what was envisioned. necessary precision and a large capital here