Puzzle the truth about "arbitrage" in the currency circle: from theory, strategy method to risk
Reprinted from chaincatcher
04/26/2025·18DRecently, I can always see all kinds of "arbitrage" talking about "risk-free annualized XXX%", to DeFi mining arbitrage combination, and then to the basic "brick-moving"... It seems that gold is everywhere, can you pick it up by bent over? 🤔
Let’s dig deeper today. How should we eat this bowl of arbitrage rice? 👇
First, based on the KOL's view, a list of common arbitrage strategies
Space arbitrage: Cross-exchange (brick-moving)
Time/Structural Arbitrage: Capital Rate (Expectations and Spot), Futures and Spot Base
Interest rate arbitrage: Stablecoin/Lending/LP Mining (DeFi/CeFi)
Cross-asset arbitrage: Triangle arbitrage
DeFi ecological arbitrage: cross-chain, aggregator, lightning loan, etc.
Special scenario arbitrage: Forecasting the market
Model-driven: Statistical arbitrage (quantitative)
Secondly, KOL arbitrage tweet summary
1. Node scientist (Ø,G) @moncici_is_girl
"Corresistance Arbitrage: How to Find "Free Lunch" in the Cryptocurrency Market? 【Theory】》
https://x.com/moncici_is_girl/status/1913804319067172897
It provides a relatively comprehensive theoretical framework for cryptocurrency arbitrage, covering a variety of mainstream strategies.
1. Cross-exchange arbitrage: Use the price difference between different exchanges (CEX or DEX) to buy low and sell high.
2. Triangular arbitrage: In a single exchange, use the exchange rate pricing imbalance between three trading pairs (such as BTC/USDT, ETH/BTC, ETH/USDT) to make profits through continuous trading (A→B→C→A).
3. Spot-Futures Arbitrage: Use the basis (Basis) between the spot market price and the futures contract price for arbitrage. Usually, buying spot and selling futures, and the price converges when it is expected to expire.
4. Capital rate arbitrage (perpetual contract): Holding opposite spot and perpetual contract positions (such as buying spot + shorting perpetual contracts), the main purpose is to earn the capital rate of perpetual contracts (when the rate is positive).
5. Lightning Loan Arbitrage (DeFi): Use the unsecured lightning loan provided by the DeFi protocol to complete a series of arbitrage operations (such as buying and selling between different DEXs) within a single transaction block and repay the loan.
6. Statistical arbitrage: Based on statistical models and historical data, we identify temporary deviations in price patterns or correlations, and conduct transactions in order to return to the average price.
2. taresky @taresky
"Risk-free annualized 360%? Crypto arbitrage that Xiaobai can understand》
https://x.com/taresky/status/1764615661324775821
It is mainly aimed at novices, and the exchange lending and capital rate arbitrage is compared.
1. Exchange lending (financial management): the most basic and most suitable for novices. Users deposit coins into exchanges, lend them to others by the platform and manage risks. The characteristics and interest rate mechanism of Bitfinex (order book), OKX (dark pool bidding), and Binance (dark pool matching) are compared in detail.
2. Capital rate arbitrage: a mechanism to hedge price risks by buying spot + shorting equal amounts of perpetual contracts, thereby earning positive capital rate. The estimation formula for APY is given: APY = (fund utilization rate) x (funding rate) x 3 (counting times per day) x 365.
3. Jemima Conlon
Cryptocurrency Arbitrage: A Complete Guide
Cryptocurrency arbitrage transactions have been comprehensively sorted out and defined, covering from the most basic cross-market spread arbitrage to the advanced flash loan arbitrage. First, the basic principles of arbitrage are clarified, and then the focus is on several typical arbitrage opportunities in the field of encryption:
1. Cross-exchange arbitrage, including price difference between centralized exchanges (due to different pricing mechanisms on different exchanges, the same asset may have slightly different prices) and price difference between decentralized exchanges (different DEX prices may be different for the time being due to AMM pricing and liquidity reasons).
2. Triangular arbitrage, that is, by redeeming three tokens in turn, explains how to use the exchange rate difference between BTC/ETH, ETH/XTZ, and XTZ/BTC to complete arbitrage.
3. Lightning Loan Arbitrage: Lightning Loan uses smart contracts to allow unsecured instantaneous borrowing, allowing arbitrageurs to scale up the operation and complete complex arbitrage processes in one on-chain transaction
The advantages of decentralized arbitrage over centralized arbitrage are also emphasized: the cost is lower and there is no need for trust custody, because users always control their private keys when arbitrage between DEXs.
4. Arbitrage six @taolige666
The latest DeFi arbitrage strategy丨"How to stabilize the annualization of more than 10%? 》
https://x.com/taolige666/status/1914519861671419929?s=46&t=AZPZW3PB-FJ_nfJ8aA7Lxg
When the market is in a downturn and investors prefer safe-haven assets, DeFi players will be more inclined to use stablecoins and Delta neutral products to manage their finances. Several stable arbitrage ideas suitable for ordinary users: use LSD combined with hedging to earn risk-free interest rate spreads, earn handling fees through hedging fluctuations through decentralized perpetual contract platform, etc., corresponding projects/pools are recommended.
The core idea is to try not to bear price fluctuations risks (Delta neutral), while capturing the benefits provided by on-chain protocols, such as pledge rewards or transaction fees. In this way, even in the market downturn, double-digit annualized returns can be achieved stably.
5. Lin Wuxian SamLam @samsir1997
"Arbitrage bricks, popular science for beginners"
https://x.com/samsir1997/status/1892247829999169893
The essence of arbitrage is attributed to the use of information gaps to "moving bricks", and the content may be more helpful to "people with basic positions + financial capabilities". Including the following arbitrage methods:
1. Interest Rate Arbitrage: Taking traditional foreign exchange as an example, borrow low-interest currency (such as Japanese yen), exchange and invest in assets in high-interest currency (such as US dollars), and earn interest rate spreads.
2. USDT and fiat currency arbitrage: specifically refers to using USDT on different exchanges (such as Bitfinex vs Kraken) to buy low and sell high prices of fiat currency (in the example USD) to buy low and sell high.
3. Positive Swap Arbitrage: In the foreign exchange market, hold a currency pair position that can earn positive overnight interest (swap/swap), and usually hedge exchange rate risks through reverse spot or other tools.
4. Cross-Market Arbitrage: Use the price differences of the same asset (taking foreign exchange to USD/BRL as an example) in different geographical markets (such as Brazilian market vs. US market).
5. Triangular Arbitrage: In (usually the same) market, the cross-exchange pricing deviation between three currencies (such as USD, EUR, GBP) is used to achieve value-added through continuous exchange.
6. Statistical Arbitrage: Based on historical data analysis, the price relationship (such as price ratio) between two or more related assets (such as USD/JPY and USD/EUR) is discovered. When the relationship deviates from the mean, it is traded in reverse, and it is expected that it closes its position and makes a profit when it returns to the mean.
6. Aliez Ren @aliez_ren
"Diverable Arbitrage Angles"
https://x.com/aliez_ren/status/1913505111139295309
Aliez Ren has developed Taoli Tools | Arbitrage Tools, with the core purpose of providing a centralized information navigation and toolbox for users who are interested in arbitrage or are practicing. It is clearly classified according to the type of arbitrage, mainly covering cross-blocking arbitrage, perpetual contract funding fee arbitrage, hedging hedging, etc., and also includes basic knowledge and tutorial parts. Details: https://renzhouly.notion.site/Taoli-Tools-18c64b000c25808e862bd0c61b193eb1
⚠️ Biteye does not endorse arbitrage tools, for reference only, DYOR
7. Brak @0xbrak
Share real players' views on current arbitrage returns and strategies
https://x.com/0xbrak/status/1890303808556920881
Discussed arbitrage strategies and mechanisms (including controversial ones)
1. Fund fee arbitrage: hedge across exchanges and earn the difference in fees.
2. Futures and Spot Arbitrage: Use the price difference between futures and spot on the delivery date to converge and make profits (for example, BN-0328-BTC futures and spot BTC).
3. Price spread arbitrage: Covering strategies such as DEX/CEX spread, triangle arbitrage, and flash loans that utilize direct price differences.
4. PT arbitrage: By trading Pendle's principal tokens (PT), the airdrop expectations are exchanged for fixed income. The underlying assets need to be studied and the non-USD PT risks are hedged.
5. JLP/HLP arbitrage: Hold Pendle liquidity certificates to hedge the risks of underlying assets, earn handling fees, airdrop rewards, etc. (it points out that most people do not hedge).
6. YT Flow (Pendle): Buy when judging that the price of Pendle income token (YT) has a sufficient safety margin to compete for future returns (for example, early $ENA and $USDC mining).
7. Option Flow: Take advantage of pricing distortions caused by emotions and other factors in the options market, and arbitrage through price spreads and straddle strategies.
8. MEV/scientist stream: Extract value on the chain through transaction sorting (such as sandwich attacks) and other methods.
8. Pix @PixOnChain
How I Made $100k Arbitraging Between Prediction Markets (Full Guide)
https://x.com/PixOnChain/status/1914377412126638095
The core strategy of sharing is to predict market arbitrage, that is, to make profits by using different platforms to give different pricing (odds) to the same event results, rather than gambling.
The key to the methodology is:
1. First, look for the same event in multiple forecast markets, and pay special attention to markets with more results.
2. Find out the minimum purchase price of all possible results of the event on each platform and add it together; if the total cost is less than USD (or 100%), there is an arbitrage opportunity. Execution must be extremely rapid, as the price difference is fleeting (“delayed gaming”), and automation tools are recommended to buy the lowest price share of all results on the corresponding platform to lock in profits.
Inclined to choose opportunities with high expected annualized rate of return (APY) (such as >60%) and do not necessarily have to be held to mature. If the market selling price of all shares held is higher than the cost, early exit will be considered to improve capital efficiency.
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