Reasons Cross-Exchange Arbitrage is Absolutely Unsustainable (for the everyman)

Jarett Dunn
2 min readDec 25, 2022

hummingbot listen up cuz you’re confusing people ❤

if I want to arb the spread on exchange a and exchange b, even if one is superliquid and one is not, then I need to either:

  1. pay someone like BEQUANT stupid money and have stupid minimum balances and plus they just got acquired and let my good buddy <redacted> go so they can get a big middle finger… oops I got distracted!
  2. You need margin that is abstracted one level from exchanges, which is ‘xmargining’ and is a high-tier service most people cannot avail of.
  3. the other option is to rebalance the currencies among exchanges that you are trading.

if you do not do these things, there is a chance that:

  1. you have 100 usdcs and 1 btc on both exhanges (ha)
  2. btc becomes really popular (imagine that) and you end up selling all ur usdcs
  3. oops you cannot arb anymore
  4. moreover if you was trading at stupid leverage you are now liq oops cheers Arthur

now, imagine you can’t hit bequant’s minimums and u need to rebalance. imagine you’re relatively poor and need to rebalance often.

  • cool

This is absolutely unsustainable for the everyman cuz -every centralized exchange has control of your keys- and will fuck up the process of a withdrawal or deposit and leave you liquidated.

why?

they -love- seeing you liquidated :)

Don’t doubt the defi counterparts are perfectly capable of doing the same w a lil bit of feigned congestion or a one-day-bug-gone-wild-that-consumes-your-entire-capital.

why?

they -love- seeing you liquidated :)

What’s the answer?

xmargin that shit on defi lol.

we ❤ marginfi.

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