Reasons Cross-Exchange Arbitrage is Absolutely Unsustainable (for the everyman)
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:
- 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!
- You need margin that is abstracted one level from exchanges, which is ‘xmargining’ and is a high-tier service most people cannot avail of.
- 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:
- you have 100 usdcs and 1 btc on both exhanges (ha)
- btc becomes really popular (imagine that) and you end up selling all ur usdcs
- oops you cannot arb anymore
- 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.
