Hercules Arbitrage Strategy

About

Hercules Arbitrage Strategy (HAS) aims at taking advantage of price inefficiencies and fluctuations in markets by identifying the overlap

between the highest bid prices and the lowest ask prices. When the bid price on one exchange is higher than the asking price on another

exchange for a cryptocurrency, this is an arbitrage opportunity and we capitalize on this opportunity to turn profits for our investors.

Types of arbitrage opportunities that will be deployed to make profits are as follows:

Simple Arbitrage: This form of arbitrage buys and sells the same crypto asset on different exchanges as quickly as possible to take

advantage of the inefficiencies of pricing across exchanges. It does not require any additional trades outside those necessary to swap the

two assets which are shared by the asset pair which is exhibiting the arbitrage opportunity. Below is the step by step process

Step 1

Collect order book data on each exchange for assets which we have evaluated for arbitrage

Step 2

Identify the arbitrage opportunity by looking at the overlap between the bid and ask prices on each exchange for the individual asset we

are evaluating.

Step 3

Sell the asset on the exchange where the price is higher and buy on the exchange where the price of the asset is lower.

Step 4

Continue selling the asset on the exchange where the price is higher and buying on the exchange where the price is lower. This will

consume the order book.

Step 5

Once the entire opportunity has been consumed, we stop buying and selling the asset.

Triangular Arbitrage: This form of arbitrage occurs on a single exchange (or across multiple exchanges) where the price differences

between three different cryptocurrencies lead to an arbitrage opportunity. Since many exchanges have a number of markets with a

variety of quote currency options. This opens up a long list of triangular trading patterns which we leverage to take advantage of

inefficiencies in an individual exchanges pricing. Below are step by step process

Step 1

Begin at one asset. This asset will be the asset to which we eventually return after completing the arbitrage loop.

Step 2

Trade to a second currency that connects to both the original asset and the next asset in the loop. This is required to prevent

transversing on the same path.

Step 3

Trade to a third currency that connects both the first and second asset. This second trade locks in a zero-risk profit due to the rate

inconsistencies across the 3 pairs.

Step 4

Convert the third currency back for the original asset.