Wish or reality? On the exploitability of triangular arbitrage in cryptocurrency markets
Year: 2024
Type: article
Abstract: This study investigates the efficiency of cryptocurrency markets by examining the presence and exploitability of arbitrage opportunities. Using high-frequency data from the Binance Exchange, we implement a triangular arbitrage strategy, considering Bitcoin , Litecoin, and the U.S. Dollar. We find 4,879 possible arbitrage opportunities. Although these findings suggest potential inefficiencies, transaction costs and limited trading volumes in the order book eliminate their profitability. Consequently, centralized cryptocurrency markets exhibit a high degree of efficiency. Moreover, our results suggest that the mere number of triangular arbitrage opportunities is not a reliable indicator of market inefficiency.
Source: Finance research letters
Authors: Matthias Muck, Thomas Schmidl, Julian Wolf
Institution: University of Bamberg
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $3,350
OpenAlex ID: W4405131149