Cryptomarkets have recently observed the creation of several tools to monitor cryptocurrencies price and bid/ask spreads for many of the popular cryptos across different exchanges. The aim of these software is to enable traders to gain from possibility of arbitrage arising from crytomarket’s inefficiencies, due to the price differences among cryptoexchanges. Born digitally, cryptocurrencies are naturally fit for full automated trading. There is enormous potential for cryptocurrency arbitrage thanks to these software, with many signals for tracking cryptos like Bitcoin, Ethereum, EOS, Ripple.
Cryptomarkets, as we know, are very inefficient and have a multitude of troubles. Volumes are very low, bid/ask spreads are quite high, volatility is high and predictability of opportunity signals is low. Because volumes are low, order books are thin. Network transfer speeds between wallets are also very unreliable. Cryptocurrencies transfers can take from a few minutes to many hours, depending on network’s features and bandwidth.
The exchanges are not very reliable, far from the level of the most sophisticated financial terminals. Some of them have been shut down by governments. Some others scale way too fast. Sometimes trades are not executed because of server overload. Exchanges’ API endpoints are quite unreliable. While investors search for safity, transfer times are instead very unpredictable.
It is quite normal, therefore, that with all these problems, an incentive to create software that enable traders to gain from these inefficiencies have been created. Traders don’t have anything to do but sit and wait for these applications to detect price spreads on different exchanges and automatically execute long/short strategies to get the most out of them. At least until the depth and liquidity of the cryptomarkets is significantly increased, it is easy to bet on the fact that these software will guarantee high profits for traders for a long time to come.