Post: #1

I've thought about this after seeing the variations on bitcoin prices at different exchanges.

However, I don't know how actual arbitrage trading systems work. So I'm asking if this would be possible. Say bitcoin is at 650 at one exchange and 600 at another. $50 isn't much so the system would have to trade large lots to make good money.

Can one setup accounts at multiple exchanges and have an automated system log in to those accounts to do the trading automatically? I'm not quite sure if these exchanges even have interfaces/APIs for this but I do see them providing this in the future (if not already).

It would be interesting to hear any stories of introducing "program trading" into these bitcoin exchanges. Any insight would be appreciated.

Post: #2

One difficulty with this is the time it takes for the network to confirm a bitcoin transaction. By the time the transfer from one exchange account to another, the price may have changed considerably, and any automated solution would have to take this into account.

That said, yes, every virtual currency exchange I've seen has some kind of API available, so your system is certainly possible to set up.

Post: #3

There really isn't much of arbitrage. Far less then what it seems like. After you account for expenses transferring money in/out of exchanges together with fees you will find the prices to be very close to each other is my prediction.

If you take MtGox last price of 120 USD, this could not be viewed as arbitrage, as there was a huge risk whether you would ever have gotten your bitcoins.

And my assumption is there already exist several trading bots competing about whatever arbitrage already exists.

Post: #4

A quick google gave me this:

Quote:Why I open sourced a bitcoin arbitrage bot

posted 8 months ago - 1 min read

I recently open sourced a bitcoin arbitrage bot written in ruby. Read my explanation of arbitrage if you're unfamiliar with the topic. After putting the project on Github, I posted it to Hacker News. It didn't get any points, but it did receive two comments. The top one was:

How is it in your interest to share this? Won't all arbitrage opportunities vanish fairly quickly as more people run clients like this?

The commenter has a great point. Arbitrage bots like this have it in their best interest to have as little people running the same algorithms as them. Arbitrage works by taking advantage of lag between two different bitcoin exchanges. If everyone was running arbitrage bots all the time, the difference between the markets would be squeezed to nothing, and only high-volume high-frequency bots could make a profit.

But to me, that doesn't really matter. I don't have nearly enough capital to try an make a living running an arbitrage bot, so it's ok if one day this arbitrage opportunity goes away. There is also a lot of risk involved with running any sort of trading bot. Technical glitches can happen, and you could end up losing a lot of money. The price of bitcoin is extremely volatile, and you need a 'cusion' of bitcoins to run this bot, so if the price of bitcoins dropped significantly your net assets would be worth much less.

Most importantly, I'm a software developer, and I just want to share my code with others (and boost my portfolio a little). I built this bot simply out of curiousity. I also learned a lot from another open source arbitrage bot, and I hope people can learn from me too.

http://hankstoever.com/posts/2-Why-I-ope...itrage-bot

Post: #5

(03-08-2014 11:25 PM)JackDavey Wrote:  One difficulty with this is the time it takes for the network to confirm a bitcoin transaction. By the time the transfer from one exchange account to another, the price may have changed considerably, and any automated solution would have to take this into account.

That said, yes, every virtual currency exchange I've seen has some kind of API available, so your system is certainly possible to set up.

Time delay was one of the first things I noticed. My solution in mind is to have enough capital to do a couple of trades then wait the 5-10 minutes for the transaction to clear, then the system is cleared to trade again. It doesn't have to trade every second or minute. The market is 24/7 so I'm fine even if it has to wait a half hour for a transaction to clear.

Post: #6

pants,

I do see arb bots on bitcoin in the future and yes it will probably be like the "program trading" on today's exchanges, making thin profits so they'll need to do hundreds or thousands of trades to make profit. But now it's still the wild west in bitcoin so the opportunity is still there. The same as with bitcoin mining. The early miners made money but much less so now. You know what I mean?

Post: #7

I don´t think you need to look into the future. Several people have already programmed trading bots taking advantage of arbitrage already.