Arbitrage is the only trading strategy used by investors in all types of cryptocurrency trading markets. The aim is for investors to benefit from the price arbitrage of digital assets across different markets and exchanges.

There are several types of arbitrage at OKEx; these are cross-market arbitrage, supply contract arbitrage, equity arbitrage, post-purchase lending + contract premium arbitrage and currency mining.

These types vary in their level of risk, but all can be done by amateur traders with a small investment. So let’s dig deeper into the different types of arbitrage.

1. Cross-market arbitrage – price difference between markets

OKEx Save → FTX

FTX’s UDST interest rates are set at 4-5% which means users can deposit into BTC, ETH among many other popular currency options. The platform allows transferring USDT through a multi-currency cross escrow account, depositing on the FTX platform for borrowing and declaring income. Users can interact with other small coins in a similar way, offering the option of borrowing low-interest coins from the OK platform and depositing them into FTX for borrowing.

FTX → OKEx Save

Since FTX’s OKB interest rate is lower than OK’s 36.5%, traders might consider borrowing and depositing OKB from FTX.

Risks and Measures

The price of collateral can fluctuate rapidly, as can the fact that it takes time for users to cash in and complete the transaction. A workaround for this is to use an API to track price movements over time or a platform that can provide information and alerts to users. This allows users to keep track of market movements, which means they can buy back and close their trades before it’s too late.

2. Price difference in delivery contract

The contract from the second quarter of the ETH can be used as an example; the difference to the original price is approx. 2.66%. Because the closer the contract is to the delivery date, the closer the price is to the spot price. So over time, the stretch will gradually decrease to 0.

Hence, you can borrow USDT as leverage to enter into a long-term contract with ETH. With a USDT lending rate of 1%, traders can concurrently close an ETH contract for the 2nd then or wait for delivery (when the delivery date comes) and generate income.

Risks and Measures

1) If the starting price goes up – the possibility of a loss is possible, but as long as it lasts until delivery – then the final base must be 0. The measure here is to consider the possibility of “hanging” until there are other options or prepare an emergency fund as a backup. To prepare for this situation, there will also be applications to update customer messages / alerts on a regular basis.

2) During this time, no adequate countermeasures will be taken for users in the event of rising borrowing costs.

3. Trading in capitalization differences

This type is suitable for users with API functions. This will change when arbitrage trading types are introduced, most of the users can use the API.

Positive funding rate arbitrage

For example, the current funding rate in SWRV is quite high, so you might consider shorting your SWRV contract to get a percentage difference. However, since traders do not want to suffer losses due to the SWRV price spike, they can consider buying hedging, but the fund utilization is not high. In the event of a low USDT interest rate, traders can borrow USDT at a very low cost, while buying SWRV and short-term SWRV contracts to earn interest.

Negative financing rate arbitrage / Negative financing rate arbitrage

For example, the SLP rate is 1%, but recently the funding rate has stabilized and is in the negative territory. For this currency, the SLP can be sold with leverage, while the contract is a long SLP. Hence, SLP’s price movement will not bring any profit or loss. You can benefit fully from the funding rate.

Risks and Measures

Funding rate trading is suitable for users with low processing fees due to the open transactions and high trading volume.

The need to control the amount of the two sides is basically the same. It is now also necessary to use the API for inventory, which can be used immediately after starting the arbitrage strategy.

In general, small money funds have relatively high interest rates, and while fund rates are unstable or vice versa, it is possible to make basic profits, but it is not easy for large funds to get in or out. The measure is to control transactions and distribute them to more suitable currencies.

4. Post-Purchase Loans + Contractual Hedging Arbitrage

For currencies with higher interest rates, users can consider buying directly and depositing into Yubibao for profit. However, since the price of small coins can drop and cause losses, users may consider selling contracts to hedge their risk.

Risks and Measures

1. The contract capital ratio can be negative. If the loss rate of the capital is greater than the income, the user is obviously losing money.

2. If the currency price rises rapidly, Yubibao’s internal coins cannot act as margin loan, which can result in the contract being terminated entirely. The proposed measure is intended to enable Yubibao’s funds to act as a deposit for platform development.

5. Mining currency

You might consider using BTC and ETH to borrow USDT and exchange for USDC lock-up mining.

Take MATIC as an example. A large number of currencies are instantly tradable, and you might consider borrowing directly to invest in lock-up mining.

Overall title

Whether you’re just starting out or a seasoned crypto market veteran, the highlight of arbitrage trading is that exchanges like OKEx allow users to automate the process. Look for price differences between different currencies. With the native API, OKEx users can monitor price movements in real time and benefit from arbitrage.

This article is for informational purposes only, this is not investment advice !!!

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