Recently, I've been seeing various discussions about "arbitrage," from "risk-free annualized XXX%" funding rates to DeFi mining arbitrage combinations, and even basic "brick moving"… It seems like there's gold everywhere, just bend down to pick it up?
Today, let's dig deeper into whether this bowl of arbitrage is truly appealing and how to approach it.
First, based on KOL viewpoints, here’s a summary of common types of arbitrage strategies:
- Spatial Arbitrage: Cross-exchange (brick moving)
- Temporal/Structural Arbitrage: Funding rates (spot-futures), spot-futures basis
- Interest Rate Arbitrage: Stablecoins/lending/LP mining (DeFi/CeFi)
- Cross-Asset Arbitrage: Triangular arbitrage
- DeFi Ecosystem Arbitrage: Cross-chain, aggregators, flash loans, etc.
- Special Scenario Arbitrage: Prediction markets
- Model-Driven: Statistical arbitrage (quantitative)
Next, a summary of KOL arbitrage tweets:
1. Node Scientist (Ø,G) @monciciisgirl
“Crypto Arbitrage: How to Find 'Free Lunches' in the Cryptocurrency Market? [Theoretical Edition]”
Provides a relatively comprehensive theoretical framework for cryptocurrency arbitrage, covering various mainstream strategies.
Cross-Exchange Arbitrage: Utilize price differences for the same cryptocurrency across different exchanges (CEX or DEX) to buy low and sell high.
Triangular Arbitrage: Within a single exchange, profit from pricing imbalances among three trading pairs (e.g., BTC/USDT, ETH/BTC, ETH/USDT) through continuous trading (A→B→C→A).
Spot-Futures Arbitrage: Profit from the basis (Basis) between spot market prices and futures contract prices, typically by buying spot and selling futures, expecting prices to converge at expiration.
Funding Rate Arbitrage (Perpetual Contracts): Hold opposite positions in spot and perpetual contracts (e.g., buy spot + short perpetual contracts), primarily to earn the funding rate of the perpetual contract (when the rate is positive).
Flash Loan Arbitrage (DeFi): Utilize uncollateralized flash loans provided by DeFi protocols to complete a series of arbitrage operations (e.g., buying and selling across different DEXs) within a single transaction block and repay the loan.
Statistical Arbitrage: Based on statistical models and historical data, identify temporary deviations in price patterns or correlations to trade with the expectation of price returning to the mean.
2. taresky @taresky
“Risk-Free Annualized 360%? Crypto Arbitrage Made Understandable for Beginners”
Mainly aimed at beginners, comparing exchange lending and funding rate arbitrage.
Exchange Lending (Wealth Management): The most basic and suitable "arbitrage" method for beginners. Users deposit coins into exchanges, which the platform lends out to others while managing risks. Detailed comparisons of the characteristics and interest rate mechanisms of three models: Bitfinex (order book), OKX (dark pool bidding), Binance (dark pool matching).
Funding Rate Arbitrage: Hedge price risk by buying spot + shorting an equal amount of perpetual contracts to earn the positive funding rate. Provides an estimated formula for APY: APY = (funding utilization rate) x (funding rate) x 3 (settlement frequency per day) x 365.
3. Jemima Conlon
“Cryptocurrency Arbitrage: A Complete Guide”
Offers a comprehensive overview and definition of cryptocurrency arbitrage trading, covering everything from basic cross-market price difference arbitrage to advanced flash loan arbitrage. It first clarifies the basic principles of arbitrage, then focuses on several typical arbitrage opportunities in the crypto space:
Cross-Exchange Arbitrage, including price differences between centralized exchanges (due to different pricing mechanisms, the same asset may have slightly different prices) and decentralized exchanges (due to AMM pricing and liquidity reasons, different DEX prices may temporarily differ).
Triangular Arbitrage, which involves sequentially exchanging three tokens to exploit pricing discrepancies, explaining how to complete arbitrage using the exchange rates of BTC/ETH, ETH/XTZ, and XTZ/BTC.
Flash Loan Arbitrage: Flash loans allow uncollateralized instant borrowing via smart contracts, enabling arbitrageurs to scale operations and complete complex arbitrage processes in a single on-chain transaction.
It also emphasizes the advantages of decentralized arbitrage over centralized arbitrage: lower costs and no need for trust in custodians, as users always control their private keys when arbitraging between DEXs.
4. Arbitrage Veteran @taolige666
“Latest DeFi Arbitrage Strategies | How to Achieve Stable Annualized Returns of Over 10%?”
In a bearish market where investors prefer safe-haven assets, DeFi players tend to use stablecoins and delta-neutral products for wealth management. Several robust arbitrage ideas suitable for ordinary users: utilizing LSD combined with hedging to earn risk-free interest rate spreads, hedging volatility through decentralized perpetual contract platforms to earn fees, and recommending corresponding projects/pools.
The core idea is to minimize exposure to price volatility risk (delta-neutral) while capturing yields provided by on-chain protocols, such as staking rewards or trading fees. This way, even during bearish market conditions, one can achieve stable double-digit annualized returns.
5. Lin Wuxian SamLam @samsir1997
“Arbitrage Brick Moving, A Beginner's Guide”
Summarizes the essence of arbitrage as utilizing information asymmetry for "brick moving," which may be more helpful for those "with foundational positions + financial capabilities." Includes the following arbitrage methods:
Interest Rate Arbitrage: Using traditional forex as an example, borrow low-interest currency (e.g., Japanese yen), exchange it, and invest in high-interest currency (e.g., US dollar) assets to earn the interest spread.
USDT and Fiat Arbitrage: Specifically refers to exploiting price differences of USDT against fiat currency (in this example, USD) across different exchanges (e.g., Bitfinex vs. Kraken) to buy low and sell high.
Positive Swap Arbitrage: In the forex market, hold positions in currency pairs that earn positive overnight interest (swap) and typically hedge exchange rate risk through reverse spot or other tools.
Cross-Market Arbitrage: Utilize price differences of the same asset (using the forex pair USD/BRL as an example) in different geographical markets (e.g., Brazilian market vs. US market) for arbitrage.
Triangular Arbitrage: Within (usually the same) market, exploit pricing deviations among three currencies (e.g., USD, EUR, GBP) through sequential exchanges to achieve appreciation.
Statistical Arbitrage: Based on historical data analysis, discover price relationships (e.g., price ratios) between two or more correlated assets (e.g., USD/JPY and USD/EUR) and conduct reverse trades when the relationship deviates from the mean, expecting to profit when it returns to the mean.
6. Aliez Ren @aliez_ren
“Diverse Perspectives on Arbitrage”
Aliez Ren developed Taoli Tools | Arbitrage Tools, with the core purpose of providing a centralized information navigation and toolbox for users interested in or practicing arbitrage. Clearly categorized by arbitrage type, it mainly covers cross-exchange brick moving arbitrage, perpetual contract funding rate arbitrage, hedging, etc., and also includes basic knowledge and tutorials. More details: https://renzholy.notion.site/Taoli-Tools-18c64b000c25808e862bd0c61b193eb1
Biteye does not endorse or recommend arbitrage tools, for reference only, DYOR.
7. Brak @0xbrak
Sharing Real Players' Views on Current Arbitrage Returns and Strategies
Discussed arbitrage strategies and mechanisms (including controversial ones):
Funding Rate Arbitrage: Cross-exchange hedging to earn rate differences.
Spot-Futures Arbitrage: Profit from the convergence of price differences between delivery date futures and spot (e.g., BN-0328-BTC futures vs. spot BTC).
Price Difference Arbitrage: Covers DEX/CEX price differences, triangular arbitrage, flash loans, and other strategies that utilize direct price discrepancies.
PT Arbitrage (Pendle): Trade Pendle's principal tokens (PT) to convert airdrop expectations into fixed income, requiring research on underlying assets and hedging non-USD PT risks.
JLP/HLP Arbitrage (Pendle): Hold Pendle liquidity certificates, hedge underlying asset risks, and earn fees, airdrop rewards, etc. (noting that most people do not hedge).
YT Flow (Pendle): Buy when judging that Pendle yield tokens (YT) have sufficient safety margins, speculating on future yields (e.g., early $ENA, $USDC mining).
Options Flow: Utilize pricing distortions in the options market caused by sentiment and other factors to arbitrage through spreads, straddles, etc.
MEV/Scientist Flow: Extract value on-chain through transaction ordering (e.g., sandwich attacks).
8. Pix @PixOnChain
How I Made $100k Arbitraging Between Prediction Markets (Full Guide)
The core strategy shared is prediction market arbitrage, which profits from the inefficiency of different platforms offering different pricing (odds) for the same event outcome, rather than gambling.
The key methodology is:
First, look for the same event across multiple prediction markets, especially focusing on markets with many possible outcomes.
Identify the lowest purchasable prices for all possible outcomes of that event across platforms and sum them up; if the total cost is less than $1 (or 100%), there is an arbitrage opportunity. Execution must be extremely swift, as price differences can vanish in an instant ("delay game"), and it is recommended to use automated tools to buy the lowest-priced shares of all outcomes on the respective platforms to lock in profits.
Tend to choose opportunities with expected annualized yield (APY) high (e.g., >60%), and not necessarily hold until expiration; if the market selling price of the combined shares held is higher than the cost, consider exiting early to improve capital efficiency.
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