Why is Bitfinex so bearish compared to others?
That. BTC-E is normally $5-10 under finex.
My question is: Do anybody in this thread have experience with arbitrage trading? Are the margins too small?
There it is. Now, time for "FRIDAY NIGHT VODKA PARTY ALONE IN A TWO ROOM FLAT IN THE SUBURBS OF OSLO"!!! Whoohoooooo!
I've done some arbitrage between BTC-E & Bitfinex, stopped doing it no matter I've been in the profit with it. There are several reasons for that.
First there's a problem with moving LTC as secondary currency between exchanges, you can not move US$ so you have to move something to balance the sheets between the cycles. LTC transactions are fast, but not fast enough that LTC fluctuations don't eat your profit. Remember that all bots are doing the same as your bot is doing at that moment when profit margin opens, so the price moves in worse possible direction for you and it moves fast, as fast as best bots can do it, and there are some very good bots out there. If you decide to put permanent amount of LTC on the exchanges, and move them only while nothing happens, general decrease in LTC value also eats your profits. Exchange fees are far from neglectable, if you have to make usual 4-trade cycle to close the arbitrage you have to pay 0.1% + 0.2% + 0.1% + 0.2% = 0.6% fee, you'll find that eats your 1% arbitrage opportunity quickly. There''s also big problem that your bot must take care not only of the prices (which is trivial) but also with the volumes (which is not). Good luck calculating estimations if your bot will be able to close the whole open position when LTC completes withdraw & deposit transaction from one exchange to another.
All above considered I can tell you firsthand that: yes, it can be done, but it was not worth the effort and risk for me. It's easier to trade and profit on the exchanges then to arbitrage between them.
Thanks! You kind of confirmed my suspicions. For me, the tempting ones are when BTC-E is 3-4% lower than the rest. But last time I looked at it the problem was that to make any real money from it I would have to trade with a larger volume than the price could carry. So it would, as you say, be a lot of work and risk for peanuts. But some kind of arbitrage would be cool, if only to get a soft entry into trading.
