AI-Driven Arbitrage Strategies

DEX Arbitrage Strategies

• Liquidity Arbitrage: This strategy exploits liquidity differences between exchanges by purchasing at a lower price on a higher liquidity exchange and selling at a higher price on a lower liquidity exchange.

• DEX and CEX Price Difference Arbitrage: This strategy takes advantage of price differences between decentralized exchanges (e.g., Uniswap, SushiSwap) and centralized exchanges (e.g., Binance, Coinbase). APIs help users identify price differences for specific cryptocurrencies across different exchanges.

• Dex Funding Rate Arbitrage: Arbisoo executes reverse orders for single-currency spot and contracts within a decentralized order book exchange, offsetting profits and losses from the orders to earn the funding rate of the contract for that currency.

Suppose the perpetual funding rate for a certain token is 0.1%. Users can receive 0.3% in funding fees per day (calculated every 8 hours), corresponding to an annualized rate of 109.5%. At this time, the capital utilization rate is 50%, resulting in an actual APR of 54.75%.

Calculation formula: APR = Capital Utilization Rate x Funding Rate x 3 x 365

CEX Arbitrage Strategies

• Spot and Perpetual Contract Funding Rate Arbitrage Spot and perpetual contract funding rate arbitrage refers to simultaneously conducting two opposite-direction, equal-quantity, offsetting trades in spot and perpetual contracts, with the goal of earning funding fee profits from perpetual contract trades.

• Arbitrage on Different Funding Rates Across Exchanges Another arbitrage strategy involves taking advantage of differences in funding rates for the same cryptocurrency across different exchanges. This strategy combines a long position on one exchange with a lower funding rate and a short position on another exchange with a higher funding rate, aiming to profit from the rate disparity. Funding rates are periodic payments exchanged between long and short traders to ensure that the perpetual contract price remains close to the underlying asset's price.

Example

Arbitrage exchange confirmation: Select two exchanges where the perpetual contract markets exhibit significant funding rate disparities (especially in cases where the same cryptocurrency has both positive and negative funding rates).

On the exchange with a positive funding rate (such as dYdX shown in the diagram), open a long (buy) position to collect the funding rate.

On the exchange with a negative funding rate (such as OKX shown in the diagram), open an equivalent short (sell) position to collect the funding rate.

Lock in profits: Since the positions on both exchanges hedge each other, regardless of market price fluctuations, the investor's position gains and losses can offset each other. This allows the arbitrageur to earn risk-free arbitrage profits by collecting funding rates from both long and short positions.

Close positions: When the funding rates on both sides converge or the arbitrage opportunity disappears, the arbitrageur can close both positions, ending the arbitrage operation.

• D-Limit Arbitrage Strategy The D-Limit order uses algorithms to predict upcoming market price movements. When the system predicts a price increase or decrease, it automatically adjusts the order price to avoid execution during volatile price swings.

• Automated Arbitrage Across Spot Price Differences Between Different CEXs This strategy involves automatically placing orders to arbitrage price differences in spot markets across various centralized exchanges (CEXs).

On-chain Yield Aggregation

Users deposit funds into the Arbisoo arbitrage tool, and the platform automatically optimizes investment strategies across various DeFi protocols to maximize returns. The strategy automatically reinvests earnings, using compound interest to enhance the annual yield. Users do not need to manage their investments manually; Arbisoo automatically switches strategies among platforms like Aave, Compound, Curve, Pendle, and Ethena to ensure optimal returns.

High-Frequency Quantitative Trading for Small Cryptocurrencies on the Blockchain

Strategy Start

1. Set criteria for the AI tool to filter small cryptocurrencies based on the number of holding addresses, purchase frequency per unit time, and price data reaching specified range values.

2. Quantitative robots automatically execute buy and sell operations.

3. Preferentially trigger other on-chain quantitative robots to start AI copy trading.

Strategy Stop

Set a maximum drawdown value; if triggered, the quantitative strategy is paused.

Expected Returns

During active periods for small cryptocurrencies on the blockchain, it is possible to achieve daily returns of 15% to 25% with a capital volume of one million US dollars.