Intra-exchange arbitrage - is it possible to make money?

Last time we talked about inter-exchange arbitrage in the cryptocurrency market. Today we will touch upon intra-exchange arbitrage in more detail.

Intra-exchange arbitrage are transactions aimed at making a profit by identifying price discrepancies in quotes between different crypto-assets on the same exchange platform.

The simplest example of an intra-exchange arbitrage transaction looks like this:

- For $5,250 we buy 125 LTC;
- We exchange 125 LTC for 1 BTC;
- We sell 1 BTC for $5,500;
- We receive an income of $250.  

The above scheme is conventionally called intra-exchange triangle, however, in fact, in this scheme you can include not three assets, but more, but then the number of commissions for exchanging one cryptocurrency for another increases.

Unlike inter-exchange arbitrage, trading on one exchange is simplified by the fact that when cyclically repeating transactions, there are no operations for depositing and withdrawing funds to different ones trading platforms. And as we understand from our previous publication, this reduces the most expensive part of commission expenses. In addition, if funds are withdrawn into fiat currency, it often takes quite a long time. Consequently, the timing of cyclical transactions is also reduced.  

To search for an intra-exchange triangle, special software bots are used, which, by comparing acceptable exchange directions, identify the so-called arbitration window. The duration of such a window is usually from several minutes to several hours. And bots automatically carry out cyclical high-frequency transactions.   

However, it is not easy to make money on intra-exchange arbitrage, because trading platforms are constantly monitoring exchange rate discrepancies and trying to prevent them. Even if such a discrepancy occurs, then for orders placed in order to make money on this, some exchanges may apply internal exchange hold - this is a delay in order execution until the arbitration window closes. After this, the transaction is either not processed or made at a bad rate, which reduces the profit to zero..  

Intra-exchange arbitrage has long been used in the Forex market, but the huge number of decentralized cryptocurrencies provide an opportunity to take advantage of this arbitrage scheme in the cryptocurrency market.