As many of you know, the BCH hard fork will happen on November 15th, and this opens up new interesting opportunities for us, as the Poloniex exchange has added trading of BCH ABC and BCH SV tokens to its platform. In this article we will look at an interesting opportunity for arbitrage trading.
How it works
• Poloniex is trying to support the fork by allowing users to trade the new BCH ABC and BCH SV tokens.
• Poloniex does not charge any commissions for trading USD.
This means that there is potentially an arbitrage opportunity because:
BCH price = BCHABC price + BCHSV price
When these conditions are not met, we can make a profit.
For example, BCH/USDC prices on Poloniex.
If we take these numbers as a trading example, we will see that:
BCH = 529.52
BCHABC + BCHSV = 413.01 + 114.79 = 527.8
This means that BCHABC + BCHSV < BCH
Since we are looking for opportunities to buy lows and sell highs, we need to:
• Sell 1 BCH for 529.52 USDC
• Use USDC to buy 1 BCHABC and 1 BCHSV for 413.01 and 114.79 respectively.
• We get 1 BCH plus 1.72 USDC profit.
Potential problems
Be that as it may, there are potential problems with this trading example, as:
• Our example does not take into account the factor of the bid/ask spread, which could wipe out our profit, given the low return on investment (ROI - 0.16%) per transaction.
• The speed of execution of transactions may be too low, while the price of tokens is constantly changing. And if it changes between completing Step 1 and Step 2, it could result in less or no income.
Possible Solutions
• You may want to look at other exchanges that support BCHABC and BCHSV trading, such as HitBTC.
• Use the automated trading feature to improve the speed of trade execution.
Most likely, it hardly makes sense to carry out this transaction manually, given the low ROI ratio and the problems that arise during the process. However, perhaps this example has given you some insight into the arbitrage trading opportunities in the cryptocurrency market that are emerging as the market evolves.
Note: This article is for educational purposes and does not constitute a recommendation or investment advice.
According to hackernoon.com
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