[Fund] Exchange Rate Differences: Arbitrage Opportunites - page 2.

azaniet

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Quote from: SebastianJu on October 23, 2013, 03:30:47 PM

Like Deprived wrote... you actually lost money with the trade. The Europrice for a bitcoin was around 100€. Today its 145€. So the bitcoins now are 45% more worth. Way less then 7%.

Of course thats probably a problem that doesnt occur often but the longer it takes to repeat such a cycle the higher is the risk. I exchange bitcoins for fiat too but i do it at bitstamp because when i do it at mtgox i dont know when i get the fiat and if i get it bitcoins might be way more worth. You might say you invested USD and now have more USD. But the long time to get the USD is a risk that easily can make you regret why you didnt keep Bitcoins instead.

Arbitrage with MtGox was done pretty often some years? ago but as long as i know it was not popular then because Mtgox has these problems with paying out fiat.

Please explain how I lost money with the trade, because I did not. I got back the fiat and retained my original btc fund + BTC2.17.

I think that you see the trade this way (correct me if I'm wrong): I am buying BTC at bitstamp, selling it at mtgox and waiting for the fiat to return before buying BTC again, and thereby risking the increase in BTC while waiting on my fiat. This would be a high risk endeavor and would've caused me to lose money. This is not what my transaction entailed.

SebastianJu

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Like Deprived wrote... you actually lost money with the trade. The Europrice for a bitcoin was around 100€. Today its 145€. So the bitcoins now are 45% more worth. Way less then 7%.

Of course thats probably a problem that doesnt occur often but the longer it takes to repeat such a cycle the higher is the risk. I exchange bitcoins for fiat too but i do it at bitstamp because when i do it at mtgox i dont know when i get the fiat and if i get it bitcoins might be way more worth. You might say you invested USD and now have more USD. But the long time to get the USD is a risk that easily can make you regret why you didnt keep Bitcoins instead.

Arbitrage with MtGox was done pretty often some years? ago but as long as i know it was not popular then because Mtgox has these problems with paying out fiat.

Quote from: azaniet on October 23, 2013, 02:53:26 PM

Quote from: Deprived on October 23, 2013, 02:13:50 PM

Quote from: azaniet on October 23, 2013, 01:53:17 PM

Quote from: Rannasha on October 23, 2013, 12:32:20 PM

Well, he posted that he received the money today, so 2 weeks after the transaction (euro-withdrawals are allegedly somewhat faster than dollar-withdrawals).

Also, his type of arbitrage is not exposed to fluctuations in the exchange rate, since he buys on Stamp and sells on Gox at the same time. It means you lock in both buy and sell prices, but you need to have both fiat and coin available to make it work (as well as wait for Gox to pay out the fiat before you start a second round)

Quote from: SebastianJu on October 23, 2013, 12:45:43 PM

I dont think its needed to have bitcoins or money on both platforms since he bought bitcoins. They can be withdrawn pretty fast and uploaded fast on mtgox too. The shareprice wont change too much in that timeframe.

I agree with Rannasha, since it would still imply more risk if you transfer (approx. 1 hour). A lot can happen in one hour especially on the BTC market. I think it would always be better to avoid this risk, especially, when I would hold responsibility for other people's funds.

Quote from: SebastianJu on October 23, 2013, 12:45:43 PM

Looks like i overread that he already got the money. But as far as i read thats nothing he can trust about. Or did Mtgox change his behaviour? It would astonish me since the exchangeprice is still so high. If its really only 2 weeks normally now then i await that the prices are getting a bit closer to other exchanges now.

The average withdrawal might take more time than the 15 days in this particular case. But, let's say it would take 1 month, then still a return of +7%/month is still worth pursuing in my opinion.

Problem is that +7% in a month turns into a loss (expressed in BTC) if BTC rises by more than 7% whilst your withdrawal is stuck in limbo.

Add to that two layers of counter-party risk (you and Mtgox) and it suddenly doesn't look very attractive.

Arbitrage opportunities where you're stuck on one (the worst) side of the deal for any length of time cease to actually be arbitrage - as the end result depends far more on how the exchange-rate moves during that period that on the relatively small difference in exchange-rates at the point at which you initiated the trade.

Just consider if you'd done such an arbitrage a week ago and were now waiting for euros to arrive. Would you REALLY think you were better off than if you'd just held BTC throughout?

I apologize beforehand, because my first language is not English, but I think that you misunderstood my explanation. I will try to clarify with an example using current exchange rates:

Preparation:

Let's say that I hold €10,000.00 at my bank account which I deposited to Bitstamp: $13,650.00 at current rates (no deposit fee).
Additionally, I own BTC70 which is deposited to my Mt.Gox wallet.

Transactions:

I buy $13,650.00 worth of BTC (0.4% fee) at Bitstamp for $199.30 ea: $13,650.00/($199.30/0.996)=BTC68.22.
At the same time I sell €10,101.01 worth of BTC (0.6% fee) at Mt.Gox for €158.25 ea: (€10101.01/158.25)/0.994=BTC64.21.

Final picture:

I now own 70-64.21+68.22 = BTC74.01 (5.7% return).
And I withdraw the fiat money: €10,101.01 * 0.99 = €10,000.00 (1% fee) which I will receive x days later.

Thus, the amount of BTC held becomes larger with each transaction. The time it will take to receive the fiat determines how many opportunities (if there are any) may be exploited.

Additionally, the amount of EUR and BTC available determine to which extent a price difference can be exploited, of course.

azaniet

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Activity: 53

Merit: 0

Quote from: Deprived on October 23, 2013, 02:13:50 PM

Quote from: azaniet on October 23, 2013, 01:53:17 PM

Quote from: Rannasha on October 23, 2013, 12:32:20 PM

Well, he posted that he received the money today, so 2 weeks after the transaction (euro-withdrawals are allegedly somewhat faster than dollar-withdrawals).

Also, his type of arbitrage is not exposed to fluctuations in the exchange rate, since he buys on Stamp and sells on Gox at the same time. It means you lock in both buy and sell prices, but you need to have both fiat and coin available to make it work (as well as wait for Gox to pay out the fiat before you start a second round)

Quote from: SebastianJu on October 23, 2013, 12:45:43 PM

I dont think its needed to have bitcoins or money on both platforms since he bought bitcoins. They can be withdrawn pretty fast and uploaded fast on mtgox too. The shareprice wont change too much in that timeframe.

I agree with Rannasha, since it would still imply more risk if you transfer (approx. 1 hour). A lot can happen in one hour especially on the BTC market. I think it would always be better to avoid this risk, especially, when I would hold responsibility for other people's funds.

Quote from: SebastianJu on October 23, 2013, 12:45:43 PM

Looks like i overread that he already got the money. But as far as i read thats nothing he can trust about. Or did Mtgox change his behaviour? It would astonish me since the exchangeprice is still so high. If its really only 2 weeks normally now then i await that the prices are getting a bit closer to other exchanges now.

The average withdrawal might take more time than the 15 days in this particular case. But, let's say it would take 1 month, then still a return of +7%/month is still worth pursuing in my opinion.

Problem is that +7% in a month turns into a loss (expressed in BTC) if BTC rises by more than 7% whilst your withdrawal is stuck in limbo.

Add to that two layers of counter-party risk (you and Mtgox) and it suddenly doesn't look very attractive.

Arbitrage opportunities where you're stuck on one (the worst) side of the deal for any length of time cease to actually be arbitrage - as the end result depends far more on how the exchange-rate moves during that period that on the relatively small difference in exchange-rates at the point at which you initiated the trade.

Just consider if you'd done such an arbitrage a week ago and were now waiting for euros to arrive. Would you REALLY think you were better off than if you'd just held BTC throughout?

I apologize beforehand, because my first language is not English, but I think that you misunderstood my explanation. I will try to clarify with an example using current exchange rates:

Preparation:

Let's say that I hold €10,000.00 at my bank account which I deposited to Bitstamp: $13,650.00 at current rates (no deposit fee).
Additionally, I own BTC70 which is deposited to my Mt.Gox wallet.

Transactions:

I buy $13,650.00 worth of BTC (0.4% fee) at Bitstamp for $199.30 ea: $13,650.00/($199.30/0.996)=BTC68.22.
At the same time I sell €10,101.01 worth of BTC (0.6% fee) at Mt.Gox for €158.25 ea: (€10101.01/158.25)/0.994=BTC64.21.

Final picture:

I now own 70-64.21+68.22 = BTC74.01 (5.7% return).
And I withdraw the fiat money: €10,101.01 * 0.99 = €10,000.00 (1% fee) which I will receive x days later.

Thus, the amount of BTC held becomes larger with each transaction. The time it will take to receive the fiat determines how many opportunities (if there are any) may be exploited.

Additionally, the amount of EUR and BTC available determine to which extent a price difference can be exploited, of course.

Deprived

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Activity: 532

Merit: 500

Quote from: azaniet on October 23, 2013, 01:53:17 PM

Quote from: Rannasha on October 23, 2013, 12:32:20 PM

Well, he posted that he received the money today, so 2 weeks after the transaction (euro-withdrawals are allegedly somewhat faster than dollar-withdrawals).

Also, his type of arbitrage is not exposed to fluctuations in the exchange rate, since he buys on Stamp and sells on Gox at the same time. It means you lock in both buy and sell prices, but you need to have both fiat and coin available to make it work (as well as wait for Gox to pay out the fiat before you start a second round)

Quote from: SebastianJu on October 23, 2013, 12:45:43 PM

I dont think its needed to have bitcoins or money on both platforms since he bought bitcoins. They can be withdrawn pretty fast and uploaded fast on mtgox too. The shareprice wont change too much in that timeframe.

I agree with Rannasha, since it would still imply more risk if you transfer (approx. 1 hour). A lot can happen in one hour especially on the BTC market. I think it would always be better to avoid this risk, especially, when I would hold responsibility for other people's funds.

Quote from: SebastianJu on October 23, 2013, 12:45:43 PM

Looks like i overread that he already got the money. But as far as i read thats nothing he can trust about. Or did Mtgox change his behaviour? It would astonish me since the exchangeprice is still so high. If its really only 2 weeks normally now then i await that the prices are getting a bit closer to other exchanges now.

The average withdrawal might take more time than the 15 days in this particular case. But, let's say it would take 1 month, then still a return of +7%/month is still worth pursuing in my opinion.

Problem is that +7% in a month turns into a loss (expressed in BTC) if BTC rises by more than 7% whilst your withdrawal is stuck in limbo.

Add to that two layers of counter-party risk (you and Mtgox) and it suddenly doesn't look very attractive.

Arbitrage opportunities where you're stuck on one (the worst) side of the deal for any length of time cease to actually be arbitrage - as the end result depends far more on how the exchange-rate moves during that period that on the relatively small difference in exchange-rates at the point at which you initiated the trade.

Just consider if you'd done such an arbitrage a week ago and were now waiting for euros to arrive. Would you REALLY think you were better off than if you'd just held BTC throughout?

azaniet

newbie

Activity: 53

Merit: 0

Quote from: Rannasha on October 23, 2013, 12:32:20 PM

Well, he posted that he received the money today, so 2 weeks after the transaction (euro-withdrawals are allegedly somewhat faster than dollar-withdrawals).

Also, his type of arbitrage is not exposed to fluctuations in the exchange rate, since he buys on Stamp and sells on Gox at the same time. It means you lock in both buy and sell prices, but you need to have both fiat and coin available to make it work (as well as wait for Gox to pay out the fiat before you start a second round)

Quote from: SebastianJu on October 23, 2013, 12:45:43 PM

I dont think its needed to have bitcoins or money on both platforms since he bought bitcoins. They can be withdrawn pretty fast and uploaded fast on mtgox too. The shareprice wont change too much in that timeframe.

I agree with Rannasha, since it would still imply more risk if you transfer (approx. 1 hour). A lot can happen in one hour especially on the BTC market. I think it would always be better to avoid this risk, especially, when I would hold responsibility for other people's funds.

Quote from: SebastianJu on October 23, 2013, 12:45:43 PM

Looks like i overread that he already got the money. But as far as i read thats nothing he can trust about. Or did Mtgox change his behaviour? It would astonish me since the exchangeprice is still so high. If its really only 2 weeks normally now then i await that the prices are getting a bit closer to other exchanges now.

The average withdrawal might take more time than the 15 days in this particular case. But, let's say it would take 1 month, then still a return of +7%/month is still worth pursuing in my opinion.

SebastianJu

legendary

Activity: 2674

Merit: 1083

Legendary Escrow Service - Tip Jar in Profile

Looks like i overread that he already got the money. But as far as i read thats nothing he can trust about. Or did Mtgox change his behaviour? It would astonish me since the exchangeprice is still so high. If its really only 2 weeks normally now then i await that the prices are getting a bit closer to other exchanges now.

I dont think its needed to have bitcoins or money on both platforms since he bought bitcoins. They can be withdrawn pretty fast and uploaded fast on mtgox too. The shareprice wont change too much in that timeframe.

Rannasha

hero member

Activity: 728

Merit: 500

Quote from: SebastianJu on October 23, 2013, 12:23:19 PM

You surely didnt try to get these $ to your bankaccount. Since you will have to wait weeks, sometimes months at mtgox. Thats why no one is selling bitcoins there. And thats why the bitcoin price there is not real.
Arbitrage is a risk with mtgox. At the moment you get the money the bitcoin already could be worth way more.

Well, he posted that he received the money today, so 2 weeks after the transaction (euro-withdrawals are allegedly somewhat faster than dollar-withdrawals).

Also, his type of arbitrage is not exposed to fluctuations in the exchange rate, since he buys on Stamp and sells on Gox at the same time. It means you lock in both buy and sell prices, but you need to have both fiat and coin available to make it work (as well as wait for Gox to pay out the fiat before you start a second round)

SebastianJu

legendary

Activity: 2674

Merit: 1083

Legendary Escrow Service - Tip Jar in Profile

You surely didnt try to get these $ to your bankaccount. Since you will have to wait weeks, sometimes months at mtgox. Thats why no one is selling bitcoins there. And thats why the bitcoin price there is not real.
Arbitrage is a risk with mtgox. At the moment you get the money the bitcoin already could be worth way more.

azaniet

newbie

Activity: 53

Merit: 0

I am sure everybody is aware of the arbitrage opportunities caused by differences in BTC exchange rates.

For example, on October 8th I bought BTC32.73 for $4052.39 (€3000) and sold BTC30.56 at Mt.Gox for €3,030.30. These transactions happened in a 10 minute time frame. Today, I received €3000 (99% * €3030.30) on my bank account. So, with this transaction I gained BTC2.17 (i.e. 7.1% return) in 15 days.

Would anybody be interested in investing in a new fund solely devoted to the above type of (risk-free) transactions? If so, please comment on how you would like this type of fund to be set up.

Topic: [Fund] Exchange Rate Differences: Arbitrage Opportunites - page 2. (Read 3549 times)