Features & explanation

What can a Arbitrage bot do?

The Arbitrage bot capitalises on small changes between markets.

The definition of Arbitrage as stated by investopedia: "Arbitrage is the simultaneous purchase and sale of an asset to profit from an imbalance in the price. It is a trade that profits by exploiting the price differences of identical or similar financial instruments on different markets or in different forms. Arbitrage exists as a result of market inefficiencies and would therefore not exist if all markets were perfectly efficient."

What does the Arbitrage bot Cost?

A Hero subscription (also for papertrading)

How does the Cryptohopper Arbitrage bot work?

Market Arbitrage (Triangular Arbitrage)

The Market Arbitrage bot will look for market inefficiencies within one exchange. The way the Hopper will proceed is as follows, the hopper will attempt to increase the amount of the coin(s) you have selected as base coin. It will do this by taking advantage of price differences between the coins available on your exchange. More specifically, it will do three different trades to increase the amount of the chosen base coin. Market Arbitrage works best on exchanges with lower trading volumes. 

For example, say that you have BTC as base coin. That Hopper has found a market arbitrage opportunity that includes the coins Ethereum and Litecoin. First, it will buy Ethereum (48 ETH) with Bitcoin (1 BTC) on the exchange (sell Bitcoin). Secondly, the Ethereum (48 ETH) the Hopper has just bought is used to buy Litecoin (153 LTC). The final step is to buy back Bitcoin (1.005 BTC), completing the triangle and increasing the initial amount of Bitcoin.

Exchange Arbitrage

The Arbitrage bot of CH allows you to trade discrepancies in the market, capitalising on changes in market price between the same pairs on different exchanges.

First of all, the arbitrage bot on Cryptohopper does not send funds among different exchanges (as you might expect from arbitrage). Therefore, we don't need permission for ''withdrawal rights'' through the API.

Secondly, in order to do exchange arbitrage, you need to own the coins for which you would like to arbitrage. For example, your base coin is USD and you have seen that normally ADA, ATOM and EOS are prone to offer arbitrage opportunities among certain exchanges. Then, you will need to have all these coins on two (or more) exchanges you want to do arbitrage on. Now you are set and ready to start taking advantage of price inefficiencies.

Thirdly, let's analyse how this mechanism works. Let's imagine that there is an arbitrage opportunity between USD (your base coin) and EOS (the coin offering the arbitrage opportunity). You own USD and EOS on exchanges A and B. On exchange A, the price of EOS is 3.10 and on exchange B it is 3.02. Therefore, there is an arbitrage opportunity since EOS is more expensive on exchange A.

A manual arbitrage trade will consists of buying EOS on exchange B and selling it for a higher price on exchange A back to USD. Then, your portfolio would result in a USD gain. An automated Cryptohopper arbitrage trade would do it differently but results in the same USD gain. Let's recall that you own USD and EOS on both exchanges. As we know, the goal is to keep the same amount of EOS while increasing your total USD amount.

Since you want to increase the amount of USD, you would, for example sell 2000 (expensive) EOS on exchange A (for USD). At the same time, you would also buy 2000 EOS (cheap) on exchange B to maintain the same amount of EOS you had before the trade. It could happen that one of your funds of a specific coin is depleted on one of your exchanges, then it will be necessary to move funds manually from one exchange to another in order to start the process again.

What does the Arbitrage bot Cost?

An adventure (exchange arbitrage) / hero subscription (both exchange and market arbitrage)