Still, you can't deny that every time the price has a big fluctuation the number of new transactions come like there's no tomorrow.
The optimistic ones try to take advantage themselves and send coins to sell. The foolish one (sorry, reality) even keep money on exchanges for this (that's an unsafe approach).
Maybe I focus too much on bots and the number of humans sending transactions themselves is much higher than I'd think.
Yeah, the arbitrage bots have little impact, you can see it right now
At -16% capacity we were having to pay outrageous fees at +10% even with a bull run going on we're almost ok, so their impact is not over those percentages.
And it will never be!
Arbitrage really works if you have enough funds on multiple exchanges so you don't rush your money around, you sell and buy to avoid somebody else taking the prize, and for this, you need real money, you can't make arbitrage with 100$ and earn a living which brings us to the limited impact of those bots and their transaction
- transfers must be done directly from the exchange to exchange for faster settlements of balances so most likely those are batching trasnctions
- there is no need to immediately move all your balance, it might be possible that after you bought with 50% of your coins the price goes in different way and you have to sell on this one and dump on the other, so no need to immediately balance the accounts
- half of the balancing will have to be done in the other pair, so this brings the sums and the number of tx to half also.
Now, considering all this, adding the fact that you don't move 0.01 back and forth each day to earn a few $, and adding the fact that exchanges themselves are of doing this internally, diminishing the spread, you simply can't have unlimited bot traffic. One a million arbitrage bots try to do this the price will be flat on all exchanges and they will simply kill themselves.
I remember a debate with a friend who is a bike/common transport nutcase, telling me that no matter how much you enlarge the roads there will still be gridlocks, because more people will use more cars. At which point I asked him, so if I make all roads with 10 lines you're telling me that the 2 million people in Prague metro area will start driving around at the same time in 10 million cars?