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Risks and opportunities in arbitrage and market-making in blockchain-based currency markets. Part 1 : Risks

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  • Vittorio Astarita

Abstract

This study provides a practical introduction to high-frequency trading in blockchain-based currency markets. These types of markets have some specific characteristics that differentiate them from the stock markets, such as a large number of trading exchanges (centralized and decentralized), relative simplicity in moving funds from one exchange to another, and the large number of new currencies that have very little liquidity. This study analyzes the possible risks that specifically characterize this type of trading operation, the potential opportunities, and the algorithms that are mostly used, providing information that can be useful for practitioners who intend to operate in these markets by providing (and risking) liquidity.

Suggested Citation

  • Vittorio Astarita, 2023. "Risks and opportunities in arbitrage and market-making in blockchain-based currency markets. Part 1 : Risks," Papers 2304.08590, arXiv.org.
    • Handle: RePEc:arx:papers:2304.08590
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    References listed on IDEAS

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    1. Dean Fantazzini & Raffaella Calabrese, 2021. "Crypto Exchanges and Credit Risk: Modeling and Forecasting the Probability of Closure," JRFM, MDPI, vol. 14(11), pages 1-23, October.
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