Are Arbitrageurs making money in this downturn?

The crypto crash and downturn in the market are not good for any trader but are arbitrageurs making money?

Arbitrage is a method of trading that takes advantage of minor price differences between identical assets in two or more marketplaces. Arbitragers purchase in one market and sell in the other to profit from the difference in pricing.

Making money

It seems a bit absurd to talk about arbitrageurs making money when the market is in a downturn. Bitcoin and Ethereum are struggling to keep prices above $20,000 and $1,000. The market cap in November stood at $3 trillion, and on Monday morning, it experienced a massive fall to $904 billion.

Arbitrageurs have a way of using algorithms and bots to exploit opportunities and make money.

President and CEO of Fluid Finance Ahmed Ismail told Decrypt. “I have friends, who, frankly, are not very clear, making tons of money from very, very simple strategies like that. These are people who have two years trading experience.”

Fluid Finance, a liquidity aggregator, uses artificial intelligence (AI) to predict price movements across centralized (such as Binance and Coinbase) and decentralized exchanges, or DEXs (like Uniswap and Curve). Then Fluid sells assets to consumers, like Bitcoin, at the best price and manages settlements with the exchange.

Ismail went on to explain what they are. “Were kind of the enemy of arbitrage traders in that we use the same strategies as them to predict the market using hyper-scale learning and quant-based strategies that are used in the high-frequency trading world. And we use that to predict the market and give clients the best possible execution.”

Because the crypto market has many sides to it. There is enough room for firms like Fluid and arbitrageurs to coexist.

A research analyst Juan Pellicer at IntoTheBlock, told Decrypt. “Having DAI, we could buy ETH at $1,400 in Sushiswap and sell it for $1,500 in Uniswap, gaining $100.”

Flash loans

A different version of arbitrage trading involves flash loans. The co-founder of Eden Network, Caleb Sheridan, told Decrypt, “You can virtually create value out of thin air with atomic arbitrage. You don’t have to have any sort of capital or take risk by holding a huge bankroll. You start off with a flash loan, buy an asset, sell it at a higher price and repay the loan all in one transaction. Your profit is whatever’s left over.”

What atomic arbitrage lacks is the number of individuals who understand it. It makes up for competition among those who do.

One reason why Eden Network’s exists is to ensure traders’ transactions are on a block on the Ethereum network.

Sheridan concluded, “Anybody can crunch the numbers on Ethereum and figure out if there’s an imbalance and figure out the best and most efficient way to clear the imbalance, it creates like a game between searchers there’s many people looking at the same opportunities, and they’re competing against each other.”

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