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I am investigating the potential for intra-exchange triangular arbitrage opportunities for the Cryptocurrency market. I believe that due its immaturity, relatively low volume and high volatility that such instances materialise and persist for periods of time long enough to be taken advantage of through an exchange API.

But I'm curious as to what the distinct and overwhelming signals are of a potential arbitrage opportunity. Are there any technical or fundamental factors to be made aware of? Or is it a case of iterating through numerous permutations of Cryptocurrencies and find which ones has the highest frequency of opportunity.

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This entirely depends on the sophistication of your competitors. If you're in a brand-new market, then you might have a low barrier to entry. But if you're in a market that's been around for a bunch of years, has had legions of computer scientists studying it, and an army of FPGA-equipped clusters running calculations, then perhaps reconsider your assumptions.

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  • $\begingroup$ That's what I was thinking. Given the scale and size of resources devoted to such tasks outlined in your answer for existing markets such as forex, commodities and equity etc, I figured that existing players would be 'slow to react' to this relatively new asset. How would one be able to find out the extent to which these players, or new players, are conducting such operations in this market? $\endgroup$ Jun 3 '20 at 23:31
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    $\begingroup$ @HamishGibson I read job ads when I want to know what a firm's tech stack is. $\endgroup$ Jun 3 '20 at 23:35
  • $\begingroup$ Thanks for your answer Chris, I was thinking as well along the lines of particular market conditions too. For example, would such instances occur more often in volatile markets or stable market conditions? Would there even be a way to measure this or is it a random variable. $\endgroup$ Jan 10 at 17:37

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