Arbitrage Behavior amongst Multiple Cryptocurrency Exchange Markets

Abstract

Compared with fiat currencies, cryptocurrencies are usually more vulnerable to speculation and thus lead to massive price fluctuations, which makes exchanging cryptocurrencies a potentially profitable but risky endeavor. We aim to contribute to the understanding of the arbitrage behavior involving multiple cryptocurrency exchange markets. Specifically, we applied a Bellman-Ford based algorithm to detect possible arbitrage opportunities. By investigating historical data from three cryptocurrency exchange markets, i.e., Gemini, Coinbase, and Kraken, we designed experiments to identify how often arbitrage was possible in the past as well as the factors that contribute to the existence of arbitrage. We believe this may bring insights into strategies to stabilize the cryptocurrency exchange markets.