Approaches to arbitrage trading on OKEx for liberalized interest rates

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Crypto arbitrage is a unique trading strategy applied by investors in all kinds of asset trading markets. The goal is for investors to capitalize on small price differentials of digital assets across a variety of multiple markets and across many exchanges.

In the case of the OKEx exchange, there are a number of different arbitrage trading options; these are cross-market arbitrage, delivery contract arbitrage, capital rate arbitrage, post-purchase loan + contract hedging arbitrage and currency mining.

All of these types of trading strategies vary in terms of the level of risk, but they can all be implemented by amateur traders with little investment capital. So, without further ado, let’s dive deeper into the types of arbitrage trading.

  1. Cross arbitration

OKEx Backup → FTX

FTX’s UDST interest rate is set at 4-5%, which means users can deposit BTC, ETH, among other popular currencies on the OK platform. This unique platform transfers the USDT through a cross currency margin account, makes deposits to the FTX platform for a loan, and provides income. Users can interact with other small coins in the same way, providing the option to borrow low interest coins on the OK platform and deposit them on FTX for loan.

FTX backup → OKEx

Since FTX’s OKB interest rate is below 36.5% OK, traders might consider borrowing OKBs from FTX and depositing them in Savings.

Risks and countermeasures

The price of collateral can fluctuate quickly, as can the fact that it takes time to buy back and close positions. The countermeasure is to use an API to monitor price fluctuations in real time or the platform to provide users with alarm messages / emails. This allows the users to follow the movements of the market and it means that they can buy back and close their positions in advance.

  1. Arbitration of the delivery contract

Looking at ETH in the second quarter contract as an example, there is a base of around 2.66%. As the contract is closer to the delivery date, the price is closer to the spot price. Thus, over time, the spread will gradually return to zero.

Therefore, you can borrow USDT leverage to get long position with ETH, with USDT loan interest rate of 1%, traders can sell second quarter ETH contract at the same time. Then close or wait for delivery (when delivery approaches) and earn income.

Risks and countermeasures

  1. If the base increases during this period (floating losses may occur, but as long as they persist until delivery), the final base should be zero. The countermeasure is to consider some floating loss tolerance when opening a position or preparing an emergency fund as a contingency. To facilitate this, the platform also has a corresponding alarm message.
  2. During this period, the cost of borrowing increased. In this case, no adequate user countermeasures have been considered at this time. Generally speaking, traditional markets use interest rate futures or interest rate derivatives to hedge risks.
  3. Capital rate arbitrage

Currently suitable for users who have the ability to use the API. This will change once arbitration begins, which means most users will be able to use the API.

Positive financing rate arbitrage

For example, SWRV’s current finance rate is relatively high, so you may want to consider shortening the SWRV contract to get a finance rate. However, because the arbitrageurs do not want to bear the losses caused by the rising price of the SWRV, they may consider buying spot SWRV hedges, but the use of funds rate is not particularly high. In the case of low USDT interest rate, traders can borrow leveraged USDT at very low cost, buy leveraged SWRV and short SWRV contracts at the same time to get funding rates.

Negative financing rate arbitrage

For example, the SLP interest rate is 1%, but recently the finance rate has stabilized and is negative. For this type of currency, SLP can be sold with leverage, while the contract is long SLP. As such, fluctuating SLP prices will not bring profit or loss. You can only benefit from the financing rate.

Risks and countermeasures

  1. Funding Rate Arbitrage is suitable for users with low processing fees due to open legs and increased transaction volume.
  2. It is necessary to control the number of positions on both sides so that it is basically the same. Currently, it is also necessary to use the API for inventory management, which can be used directly after launching the arbitrage strategy.
  3. Generally, the rates of small funds in foreign currencies are relatively high, and when the rate of funds is unstable or reversed, although a basic profit can be generated, it is not easy for large funds to enter. and get out. The countermeasure consists of controlling the positions and spreading them over a number of currencies suitable for arbitrage.
  4. Loan after purchase + Arbitration for contract coverage

For currencies with higher interest rates, you can consider buying and depositing Yubibao directly for profit. However, as the price of small parts can drop and cause losses, you may want to consider selling contracts short to hedge against risk.

Risks and countermeasures

  1. The contract capital rate can be negative. If the capital rate loss is greater than the loan income, arbitrage will lose money instead.
  2. When the currency price rises rapidly, Yubibao’s internal coins cannot serve as margin, which may result in the contract being liquidated. The countermeasure is to allow Yubibao funds to act as a margin for the development of the platform.
  1. Currency extraction

You can consider using BTC and ETH to borrow USDT and exchange it for USDC lockdown mining.

Take MATIC as an example. Many currencies have spot mining, and you may want to consider borrowing the currency directly to invest in lockdown mining.

Closing thoughts

Whether you are new to trading or are a seasoned veteran of the crypto market, the beauty of arbitrage trading is that exchanges like OKEx allow users to automate the process of finding price gaps between. different currencies. Through the use of the native API, OKEx users will be able to monitor price fluctuations in real time and start profiting from arbitrage trading.