Bitcoin arbitrage, pros and cons, experience and profitability

[burnettm]

I have the hard data of millisecond by millisecond arbitrage opportunities from 6 major exchanges on which my bots operate.

I'm going to have to call bullshit here, unless you were located in the same data centers as the exchanges and were bypassing their CDNs, or were simply flooding them with requests and managing to evade the throttling features of their CDNs, you're not going to have this data.

using 10 different IP addresses to gather the fastest data

Which indicates you're not colo'ed with the exchanges and bypassing their CDNs, and you certainly dont have enough IPs to bypass the CDN throttling, while still maintaining the Nyquist rate.

No human can compete with my bots acting within 20 milliseconds

The latency on your bot is going to be a lot more than 20ms given the above and other factors. And if your claims were true then the spreads between the exchanges would be a lot tighter than they are now. Just looking at BTC-e and Bitstamp, the spread between the two is $7.

So please, tell me what exchanges your bot operates on so I can further prove you wrong.

[crazyivan]

Well, trading Darkcoin has been very profitable lately, the price swings 30-40% per day, buying low and selling high has been quite fun recently.

[crazyivan]

BTC going up, lots of trading opportunities.

[CryptoGuu]

Use http://x-value.com if you want to take a high profit.

burn in hell scammer.

[anti-dot]

burn in hell scammer.

I am just an affiliate, not a scammer. Did you make a new account only to slander me?

[burnettm]

burn in hell scammer.

I am just an affiliate, not a scammer. Did you make a new account only to slander me?

Ivan plz go. I already proved how you're a obvious shill here:
https://bitcointalk.org/index.php?topic=621328.msg6899521#msg6899521

[floatertheplayer]

I have the hard data of millisecond by millisecond arbitrage opportunities from 6 major exchanges on which my bots operate.

I'm going to have to call bullshit here, unless you were located in the same data centers as the exchanges and were bypassing their CDNs, or were simply flooding them with requests and managing to evade the throttling features of their CDNs, you're not going to have this data.

using 10 different IP addresses to gather the fastest data

Which indicates you're not colo'ed with the exchanges and bypassing their CDNs, and you certainly dont have enough IPs to bypass the CDN throttling, while still maintaining the Nyquist rate.

No human can compete with my bots acting within 20 milliseconds

The latency on your bot is going to be a lot more than 20ms given the above and other factors. And if your claims were true then the spreads between the exchanges would be a lot tighter than they are now. Just looking at BTC-e and Bitstamp, the spread between the two is $7.

So please, tell me what exchanges your bot operates on so I can further prove you wrong.

Hmm someone who knows his stuff, I like it!

I do not need to prove you wrong I have the hard fact that 95% of my trades do happen at the prices I get with the above methods. And these are outlier prices on which everyone else bot/human jumps as well. Q.E.D

I do understand that eventually my latency is much bigger than 20ms, but it is outside of the factors that I can control. Most of my scraper servers do tend to be close to exchange data centers. I get eg. 5 ping to Bitstamp I can tell you where they are in private if you want to know.

I do understand that there may be prices in books that the public including me do not see. That is the category cheating on the side of exchanges, but it happens on "respected" exchanges like NASDAQ too. I hate insider HFT bullshit too. The no real market "competition" system we live under, that costs us a lot of GDP growth in the end.

On the other hand you are not that good in economics are you. 7 dollar spread does not prove anything. When I talk about profits it is the risk adjusted daily equivalent. To have arbitrage as a business model not as a gambling model, you need much more than 7 dollar spread. I catch spikes and the premise of my post was just that that no human can compete with me in that like crazyivan... I think we can agree on that.

[burnettm]

I get eg. 5 ping to Bitstamp I can tell you where they are in private if you want to know.

Bitstamp uses the Incapsula CDN which would probably explain your low ping times. Their DNS A records for bitstamp.net point to 149.126.72.187 and 149.126.77.187, which ARIN says are allocated to RIPE, and RIPE says they are assigned to Incapsula. Their CNAME for www also forwards to a Incapsula server. And I know from first hand experience that Incapsula will throttle connections if the bot is aggressive enough, and that they refuse to work bot developers to have their applications appropriately classified. Also interestingly although they try to imply they are an American company with the only address listed on their site being in San Francisco, all of their techs I spoke with are actually off-shored to Israel.

If you managed to find Bitstamps actual IPs which are behind the Incapsula CDN, I would be very much interested in knowing them, so feel free to send me a PM if you have them.

With that said, with Bitstamp you dont need to poll their API to maintain a copy of the order book, since they have a pusher API service for this. But other exchanges like Cryptsy (which also uses Incapsula) only offer push data for trades, not for the order book.

I do understand that there may be prices in books that the public including me do not see.

Rather than this being something the exchange is doing, I would probably place the blame with dark pool like services such as BTX Trader and other bots.

7 dollar spread does not prove anything. When I talk about profits it is the risk adjusted daily equivalent. To have arbitrage as a business model not as a gambling model, you need much more than 7 dollar spread.

Well that all depends on your risk models.

I catch spikes and the premise of my post was just that that no human can compete with me in that like crazyivan... I think we can agree on that.

Well it all depends on the type of arbitrage you're engaging in. If you're referring to inter-exchange intra-market, then yes I think a human technically could, depending on a variety of other factors which for obvious reasons wouldn't be appropriate to talk about here, especially if your risk models are as conservative as you imply they are in the previous quote.

And regarding crazyivan, I would probably have to agree with you, and that bitcoin-trader.biz link in his signature which advertises a arbitrage hedge fund reeks of being a Ponzi scheme.

[crazyivan]

So do not use the link if you do not like it, no problem with that. But you cannot tell me you have not tried any form of arbitrage so far, If it works in bunch of other markets, I really see no reason why it would not work in an extremely volatile market such as crypto.

[TwinWinNerD]

So do not use the link if you do not like it, no problem with that. But you cannot tell me you have not tried any form of arbitrage so far, If it works in bunch of other markets, I really see no reason why it would not work in an extremely volatile market such as crypto.

I read the word arbitrage on this forum and guess who is around again...

[jonsi]

      I had made some profits from arbitrage but not with btc/usd but with btc/alts. In simple words it's not worth it with btc/usd because the fees, the transfers between banks and exchanges will eat your profits. Not to say that you have to have both btc and fiat on multiple exchanges if you want your arbitrage to work. With alts it's easier but you have risks there too. If you want to trade lots of them... well, it may not work because the time until you buy from one exchange, transfer to another and sell it's not instantaneous and the price can change very fast.
     What I have done: I observed the market for one alt on more exchanges, bought when I thought it was a good price, transfered on other exchange and after that awaited for the price to change and the made the arbitrage on both exchanges simultaneous. I have made some profit but not something serious. I stoped right on time and widraw all my funds just right before one exchange "freezed" all accounts.
     My conclusion: It's not worth it if you don't use some automated system like bots. The risk is very high, you can loose it all due to counterparty risk (ex: exchanges disapear or "freezing" accounts). You may end up some profits but be prepared to loose all your investment. NEVER INVEST MORE THAN YOU4RE PREPARED TO LOOSE!

[xybersurfer]

      I had made some profits from arbitrage but not with btc/usd but with btc/alts. In simple words it's not worth it with btc/usd because the fees, the transfers between banks and exchanges will eat your profits. Not to say that you have to have both btc and fiat on multiple exchanges if you want your arbitrage to work. With alts it's easier but you have risks there too. If you want to trade lots of them... well, it may not work because the time until you buy from one exchange, transfer to another and sell it's not instantaneous and the price can change very fast.
     What I have done: I observed the market for one alt on more exchanges, bought when I thought it was a good price, transfered on other exchange and after that awaited for the price to change and the made the arbitrage on both exchanges simultaneous. I have made some profit but not something serious. I stoped right on time and widraw all my funds just right before one exchange "freezed" all accounts.
     My conclusion: It's not worth it if you don't use some automated system like bots. The risk is very high, you can loose it all due to counterparty risk (ex: exchanges disapear or "freezing" accounts). You may end up some profits but be prepared to loose all your investment. NEVER INVEST MORE THAN YOU4RE PREPARED TO LOOSE!

just out of curiosity. which exchange froze all accounts?

[jonsi]

      I had made some profits from arbitrage but not with btc/usd but with btc/alts. In simple words it's not worth it with btc/usd because the fees, the transfers between banks and exchanges will eat your profits. Not to say that you have to have both btc and fiat on multiple exchanges if you want your arbitrage to work. With alts it's easier but you have risks there too. If you want to trade lots of them... well, it may not work because the time until you buy from one exchange, transfer to another and sell it's not instantaneous and the price can change very fast.
     What I have done: I observed the market for one alt on more exchanges, bought when I thought it was a good price, transfered on other exchange and after that awaited for the price to change and the made the arbitrage on both exchanges simultaneous. I have made some profit but not something serious. I stoped right on time and widraw all my funds just right before one exchange "freezed" all accounts.
     My conclusion: It's not worth it if you don't use some automated system like bots. The risk is very high, you can loose it all due to counterparty risk (ex: exchanges disapear or "freezing" accounts). You may end up some profits but be prepared to loose all your investment. NEVER INVEST MORE THAN YOU4RE PREPARED TO LOOSE!

just out of curiosity. which exchange froze all accounts?

VIRCUREX

Total balances after the amounts have been distributed
BTC: 346 accounts with frozen amounts, total 1720 BTC
FTC: 42 accounts with frozen amounts, total 152,075 FTC
LTC: 2432 accounts with frozen amounts, total 124,917 LTC
TRC: 77 accounts with frozen amounts, total 127,746 TRC

Update
We will regularly publish updates here on the number of accounts affected

All in all a bit over 90,000 registered users and accounts. Due to the above freeze and the subsequent distribution of the available funds, a large number of accounts have been restored to their rightfull account balance, some unfortunately remain frozen for the time being and will over time be released as and when funds become available. Here the number of accounts with frozen balances:

As of 25. March 2014:
BTC: 355 accounts
FTC: 42 accounts
LTC: 2,563 accounts
TRC: 77 accounts

[crazyivan]

Part of the problem with arbitrage is that others will be doing it, hence the current profit margin that can be gained from doing so will already be taken advantage of.

The free market is very adept at handling price mis-matches, especially if there is real money to be made.

If you're going to arbitrage, I'd stick with exchanges with fast turnarounds and really low fees, like 0.2% or even less.

But of course, with Vircurex just freezing accounts, that doesn't help either. There's no regulation out there, so nothing prevents exchanges from just outright stealing your money and then claim some bs like "fraud prevention."

When you say low fees, which exchanges do you prefer, could you please list a few?

[ShakyhandsBTCer]

Part of the problem with arbitrage is that others will be doing it, hence the current profit margin that can be gained from doing so will already be taken advantage of.

The free market is very adept at handling price mis-matches, especially if there is real money to be made.

If you're going to arbitrage, I'd stick with exchanges with fast turnarounds and really low fees, like 0.2% or even less.

But of course, with Vircurex just freezing accounts, that doesn't help either. There's no regulation out there, so nothing prevents exchanges from just outright stealing your money and then claim some bs like "fraud prevention."

Even if you have low fees, you still have the issue of having to wait for 3 or 6 confirmations to have your funds available at the other exchange and risk the price moving against you in that time.

[morphtrust]

I would say if people are willing to do this work and for the lower money in it, and it makes their lives better, go ahead and do it,

To me this process is as important to the bitcoin and altcoin culture as bees are to plants, when they cross pollinate them to make seeds and such, The act the traders here are doing is a way of bringing balance to an unbalanced system and networking the economic ecology of the crypto world since with out it the trading sites would be in a vacuum and that would become damaging to the use of it for store and use of it as a medium of wealth to stimulate production and growth

that being said, I find it more lucrative to spend my time while waiting for the market to swing, working on other things, and just make money off buying and selling on one major location that will be able to handle the larger volumes of coins when I have them, until then I am set, at that point you will see me cashing out my excess coins that I can not trade with because the market can not absorb them, for real world stuff, so if you have something like scrap copper and other resources used in industry, keep me in mind, as I would love to use my crypto directly and avoid using the REAL scam of FIAT currencies made by central banks who back it with NOTHING, and create an excessive amount of friction in transactions, unlike crypto

[crazyivan]

I would say if people are willing to do this work and for the lower money in it, and it makes their lives better, go ahead and do it,

To me this process is as important to the bitcoin and altcoin culture as bees are to plants, when they cross pollinate them to make seeds and such, The act the traders here are doing is a way of bringing balance to an unbalanced system and networking the economic ecology of the crypto world since with out it the trading sites would be in a vacuum and that would become damaging to the use of it for store and use of it as a medium of wealth to stimulate production and growth

that being said, I find it more lucrative to spend my time while waiting for the market to swing, working on other things, and just make money off buying and selling on one major location that will be able to handle the larger volumes of coins when I have them, until then I am set, at that point you will see me cashing out my excess coins that I can not trade with because the market can not absorb them, for real world stuff, so if you have something like scrap copper and other resources used in industry, keep me in mind, as I would love to use my crypto directly and avoid using the REAL scam of FIAT currencies made by central banks who back it with NOTHING, and create an excessive amount of friction in transactions, unlike crypto

What you are saying is that you do not like arbitrage but instead sell at $650 and then wait till it goes down to $600 to sell, for example. But this is even more risky then actual arbitrage cause with arbitrage there are at least several exchanges to chose from. These large market swings usually go the same direction on each of these larger exchanges so if you do not guess the direction of the swing, you can kiss your BTC goodbye. Unless you are prepared to wait for months and hope things get back to desired levels again.

[morphtrust]

***Edit****
Snipped since it is in the message right before the one I am quoting, and I am not changing it again
***end edit****

What you are saying is that you do not like arbitrage but instead sell at $650 and then wait till it goes down to $600 to sell, for example. But this is even more risky then actual arbitrage cause with arbitrage there are at least several exchanges to chose from. These large market swings usually go the same direction on each of these larger exchanges so if you do not guess the direction of the swing, you can kiss your BTC goodbye. Unless you are prepared to wait for months and hope things get back to desired levels again.

I said something nice and you had to crap on me, so here, have some sarcasm

I guess you are right! Gosh I have been so stupid, I missed selling on some really good spikes and only doubled my money recently instead of getting 5x or even 10x as much by now, I must be a total idiot!!!

lol I told you it was going to be sarcastic, By the way for the record, the more confident I get and stop messing about only working with 10 to 20% of my funds and just bull on in, the faster I have been doubling my money, so... yeah,

And additionally I will not lie, what I started with last year I lost quite a bit of and had to recover from, while I was learning but I have never put more money into the market, everything I have now is due to speculative trades to keep adding to my crypto portfolio portion of my funds.

[adaseb]

Crazyivan, you are doing nothing but wasting your time.


Whether Arbitrage is profitable or not. Nobody will tell you their method.


Why? Use your damn brain?

WHy would they want you to steal their arbitrage opportunites?

Why should I teach you my method and have you put a bid or ask one satoshi difference from mine and you get a fill and I don't. You make a profit and I don't. Why in the world should I teach you that.

Only person that would teach you that, is if he got something in return such as subscribing to your scam site.



Only way to make money in Bitcoin in the short term is by trading it. Mining is not profitable and neither is buying 1 BTC and hoping and praying to the Gods that it goes to $100,000 one day.

[morphtrust]

Crazyivan, you are doing nothing but wasting your time.


Whether Arbitrage is profitable or not. Nobody will tell you their method.


Why? Use your damn brain?

WHy would they want you to steal their arbitrage opportunites?

Why should I teach you my method and have you put a bid or ask one satoshi difference from mine and you get a fill and I don't. You make a profit and I don't. Why in the world should I teach you that.

Only person that would teach you that, is if he got something in return such as subscribing to your scam site.



Only way to make money in Bitcoin in the short term is by trading it. Mining is not profitable and neither is buying 1 BTC and hoping and praying to the Gods that it goes to $100,000 one day.

lol exactly, that is like teaching someone how to do something that you are doing and then having them do the same thing and compete against you since there is no limit on how much you could be doing here, so there is no way to be sure that there will be enough market to spread around to everyone, instead whales will come and gobble up all the profits and leave NOTHING for anyone else lol. its not like making a part that is hard to make and there is a ton of demand for it, so there is plenty of room to grow into that will never be filled totally, unlike that part, doing transactions of larger size takes NO ADDITIONAL physical effort other than a few different key strokes, lol