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76

Many people already do this with bitcoin. In finance, this is called arbitrage trading, or simply arbitrage, sometimes even abbreviated arb. The reason for the price differences are fees for transferring between the bitcoin exchanges (you have to transfer both, bitcoins and fiat currency for a complete cycle) and fees for trading bitcoins against fiat ...


70

Arbitrage - What it is and how it works Arbitrage refers to the process of instantly trading one or more pairs of currencies or odds for a nigh risk-free profit. Usually, this involves two exchanges (this is then called a two-legged arbitrage); although more are, of course, possible. There are several steps when executing an arbitrage: Find a suitable ...


40

I've writen software to arbitrage on some US exchanges. I couldn't arbitrage without software because: It was hard to account for all fees to understand if an opportunity is profitable. It took a couple of minutes to evaluate opportunities (query an exchange's order book, query another exchange's order book, do an evaluation, execute a sell, execute a buy) ...


23

What's stopping people from doing so? What's the catch? The catch is that few people have been able to get US dollars out of Mt. Gox since June 20, 2013, when Mt. Gox imposed a "hiatus" on US dollar withdrawals. Mt. Gox has a long list of excuses for not paying their debts, which you can find on their site. Some of their excuses strain credulity. This ...


22

There are a variety of variables that affect Bitcoin pricing on the exchanges. Some are: Market size Exchange volume Price of entry Market size: Relatively speaking, the market for Bitcoins is small. In April of 2013 it was about 1.2 billion USD, and a few days later dropped to below 750 million USD. That's a small market cap, which means, among other ...


16

I am not an expert on this, but I will answer from my personal experience from the past couple of months. Here are some things I noticed: MtGox rules the market. The price there leads and the other exchanges follow. Sometimes TradeHill moves a few decimal points on its own above or below MtGox, but it usually goes back to where it was after a few hours. The ...


15

After studying Bitcoin Arbitrage for the past few months, I've developed an information service to answer this question. CoinThink.com gives a complete picture of arbitrage. All asks that have a bid at a higher price (on another exchange) are tallied into a total opportunity amount, including the fees for each exchange. It also makes an estimate on the fee ...


9

Yes. Simply hold accounts on multiple exchanges. In the account you should try to keep your holdings at 50% bitcoin and 50% other currency. When there is an arbitrage opportunity you can execute "complimentary" transactions on both exchanges. On one you buy the difference, and the other you sell the difference. You can then equalize the accounts by ...


8

One of the major reasons standing in the way of profiting from arbitrage opportunities has to do with "volume". The volume for either exchanges is not high enough yet to support big trades. Large profits require large trades (in arbitrage). Making $1,000 may be feasible between exchanges, but that's an extreme best case scenario and using 10k in capital! ...


6

Something I am currently looking into, and a huge issue that nobody has really mentioned earlier is blockchain time. 1) Bitcoin is traded on a number of exchanges, however the entire process of buying on one exchange, transferring to another exchange and selling on that second exchange can take on the order of magnitude of 30 minutes(~10 minutes per block ...


6

This is possible and many people do it, but the loop can be significantly delayed by the time it takes to transfer fiat between exchanges. There may be automation software out there, but it is likely closely guarded by those who employ it. There is still the manual step of coordinating fiat movement.


6

Observations Mt.Gox is currently offering neither fiat withdrawals, nor Bitcoin withdrawals. No withdrawals means that the Mt.Gox price is completely decoupled from the Bitcoin market, as there can be no arbitrage to close the gap. Precursors Mt.Gox has handled the Malleable Transaction issue poorly, and squandered the trust of a lot of its users. ...


5

The problem might be that TradeHill adds orders to the Orderbook before processing them. For example, this happened today: Around 18h10 UTC, the highest bid was 4.842524 and the lowest ask was 4.840000 Around 22h00 UTC, the highest bid was 4.820000 and the lowest ask was 4.819900 I have also detected similar situations at ExchangeBitcoins.com. CampBX and ...


5

nmat: i think you got the signs wrong in there somewhere. the fees will /decrease/ your effective selling price, and /increase/ your effective purchase price. so it should in fact be: ExchangeA_sell * (1 - ExchangeA_fee) - ExchangeB_buy * (1 + ExchangeB_fee) and also, you should take into account any deposit/withdrawal fees (E.g., when you withdraw via LR ...


5

ga bitbot from the project page: ga-bitbot is a distributed genetic algorithm tuned automated mtgox trading system for Bitcoin which includes market data collection, gene client/server, reporting tools, and automated trading. The intention of this project is to create a high frequency capable trade platform for the bitcoin p2p currency. bitcoin ...


5

See this pdf for more information. If you were asking about a two currency arbitrage between different markets. For example, the BTC/USD exchange rate at MtGox and one at Intersango then the following formulas apply considering brokerage fees at both exchanges. For simplicity I am using BTC as the base currency and USD as the quote currency, but you can ...


5

There are on occasion decent opportunities for arbitrage if you are willing to go through the hassle for a few bucks. Here are two data services that are useful: - http://nyse-group.de/bitcoin-arbitrage - http://fnoose.com/bitcoin/arbitrage The opportunities are the largest after a sudden move in the price on the leading exchange, Mt. Gox which leaves ...


4

Mtgox uses a multi currency trading engine that matches trades between the different currency pairs. All trades are drawn from the one pool. Trades in one currency are matched against trades in another currency using ECB exchange rates, and tacking on a 2.5% fee. See Mtgox FAQ for further info: https://support.mtgox.com/entries/20800336-Multi-Currency-...


4

CryptoStreet will allow exactly that. (disclaimer: I'm one of the owners). We will hold funds at the various exchanges and you hold funds with us. That'll allow you near instant trades across various exchanges and enjoy arbitrage


4

I wrote a simple market maker bot in Python: https://github.com/chrisacheson/liquidbot This software allows you to place orders on MtGox market. Liquidbot uses ezl's wrapper code to interface with MtGox: https://github.com/ezl/mtgox Aricie runs a hosted market maker bot platform: https://dnnbitcoin.aricie.com/default.aspx


4

In a market exchange, price is determined as being where buy and sell orders meet. Buyers not needing bitcoins immediately are then most interested in obtaining bitcoins at the lowest price possible. Sellers not needing cash immediately are then most interested in obtaining the highest price as possible. Because of differences in deposit and withdrawal ...


3

I'm not a lawyer. In the U.S., the lack of mens rea in your example would not cause you to have violated any laws. As a person selling your coins, it is not your responsibility to determine your buyer's intentions. Of course, this is not quite so simple. Money transmitters have regulations that include AML/KYC (know your customer) requirements which ...


3

To answer your first question: I do not know any free, opensource, trusted software that arbitrages for you. It will not generate any money for the developers, and only depletes their source of income. To calculate the profit in arbitrage you first have to know all the steps: Buy a Bitcoin for $600 (rate #1) on exchange A (trading fee #1) Send this ...


3

First, to clear things up, it isn't up to the exchange to quote a certain price/rate. It's all up to the users of that exchange what they ask/bid for a bitcoin. For example there are two exchanges, X and Y, with both have an ask one 500 USD and a bid on 400 USD. Then person A bids a higher price, lets say 470 (instead of 400), on exchange X. Person B asks a ...


3

The formula for sell_order_Net_total will be: sell_order_Net_total = sell_amount * sell_price * (1- sell_ex_txn_fee) The final profit: Profit = sell_order_Net_total - buy_order_Net_total Keep in mind that there are also transaction fees between the two exchanges. If you have traded all your DOGEs for BTC on 1 exchange, and BTC for DOGEs on the other, ...


3

Sure it's legal. Unless either country has outright banned buying/selling Bitcoins. I don't think there's any country that has gone that far. You may have to report income/profit/trades to your tax office, depending on local laws. In some countries you may need to pay VAT as well. Setting up accounts with (foreign) exchanges means that you are entrusting ...


3

To be more specific about the "arbitrage strategies" in Tanmay's answer: Suppose there were a difference in price between two exchanges: at A the price is $10,000 and at B it is $10,100. Then, in principle, someone could turn a quick and risk-free(*) profit by buying coins on A, transferring them to B, and selling them for the higher price. This is called ...


2

It's pretty simple. Like you said, you only have to add the fees to the selling price and subtract them from the buying price. Considering that the fee is a number between 0 and 1 that represents the percentage, here is an example: ExchangeB_bidPrice * (1 - ExchangeB_fee) - ExchangeA_askPrice * (1 + ExchangeA_fee) This will give you the profit per coin for ...


2

In order for arbitrage to succeed, you need to be able to execute nearly simultaneous buy and sell transactions across exchanges, not do it manually. Why? Because the slower arbs will always get beat by the faster arbs, and slower arbs are left holding stuff they now need to buy or dump. This was the case when there were multiple automated exchanges for ...


2

The force keeping the exchange rates of various currencies in balance is the same force keeping the exchange rates the same across multiple exchanges: Arbitrage. When the value of Bitcoin is different enough that one could buy cheaply for one currency then sell for a profit in another, or in the same currency across multiple exchanges, people will do just ...


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