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Wish or reality? On the exploitability of triangular arbitrage in cryptocurrency markets

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  • Muck, Matthias
  • Schmidl, Thomas
  • Wolf, Julian

Abstract

This study investigates the efficiency of cryptocurrency markets by examining the presence and exploitability of arbitrage opportunities. Using high-frequency data from the Binance Exchange, we implement a triangular arbitrage strategy, considering Bitcoin, Litecoin, and the U.S. Dollar. We find 4,879 possible arbitrage opportunities. Although these findings suggest potential inefficiencies, transaction costs and limited trading volumes in the order book eliminate their profitability. Consequently, centralized cryptocurrency markets exhibit a high degree of efficiency. Moreover, our results suggest that the mere number of triangular arbitrage opportunities is not a reliable indicator of market inefficiency.

Suggested Citation

  • Muck, Matthias & Schmidl, Thomas & Wolf, Julian, 2025. "Wish or reality? On the exploitability of triangular arbitrage in cryptocurrency markets," Finance Research Letters, Elsevier, vol. 73(C).
    • Handle: RePEc:eee:finlet:v:73:y:2025:i:c:s154461232401537x
    DOI: 10.1016/j.frl.2024.106508
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    More about this item

    Keywords

    Triangular arbitrage; Cryptocurrencies; Market efficiency;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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