What Is Triangular Arbitrage in Cryptocurrency Trading?
Triangular arbitrage involves exploiting a price discrepancy among three different cryptocurrencies traded against each other on the same exchange. The trader executes a series of three trades: A to B, B to C, and finally C back to A. The goal is to end up with more of the starting currency than was initially held.
This requires simultaneous execution to lock in the profit before the rates adjust. It's a type of intra-exchange arbitrage.
Glossar
Price Discrepancy
Volatility ⎊ Price discrepancies in cryptocurrency, options, and derivatives markets frequently stem from volatility differentials.
Triangular Arbitrage
Arbitrage ⎊ Triangular arbitrage, within the context of cryptocurrency derivatives and financial markets, exploits temporary price discrepancies across three distinct markets or exchanges for the same underlying asset or related instruments.
Simultaneous Execution
Coordination ⎊ Simultaneous execution, within cryptocurrency and derivatives markets, denotes the capacity to initiate multiple orders across diverse exchanges or instruments at precisely the same moment, minimizing latency-induced slippage.