Triangular arbitrage is the result of a discrepancy between three foreign currencies that occurs when the currency's exchange rates do not exactly match up. These opportunities are rare and traders who take advantage of them usually have advanced computer equipment and/or programs to automate the process. - Investopedia
Let's use a fictitious ideal example.
You can see here that if you have 1 unit of
USDC you can sell it for 3 units of
BTC. Then you can sell 3 units of
BTC for 1 unit of
ETH each so you get 3 units of
ETH. Now, you call sell 3 units of
ETH for 2 units of
USDC each, so you get 6 units of
USDC. Thus by going in such a cycle you can make initial investment of 1 unit into 6 units. Pretty sweet deal 🚀🚀🚀
Let's try seeing if we can do the same thing on Coinbase Pro and make some real 💸.
- After reading Coinbase API docs
You will get trading pairs that are available on Coinbase Pro.
You can save them to a file and then load them into your Python script to do the analysis.
I decided to analyze this data with Wolfram Language since it's much easier and faster.
Now, we need to find out if there are any cycles that we can exploit to do Triangular Arbitrage.
Interestingly, there are no cycles within the trading pair graph. So it seems that you cannot do triangular arbitrage within the broker without withdrawing your money and then buying crypto again 😞
- View live triangular arbitrage opportunities on Binance