How to Use Bybit Arbitrage to Achieve Funding Rate and Price Difference Arbitrage
If you're seeking consistent returns with minimal risk, Bybit Arbitrage is the perfect ally. This robust tool empowers you to generate regular profits with minimal risks by capitalizing on price disparities across different markets. Its user-friendly interface lets you easily spot and exploit these differences, so that you can execute flawless arbitrage trading in the crypto market with confidence. Read on to learn how Bybit Arbitrage makes arbitrage trading an effortless way for you to achieve low-risk gains.
Key Takeaways:
Bybit Arbitrage is a trading tool that helps traders capitalize on funding rate and price differences across various cryptocurrency markets via its two main features: Funding Rate Arbitrage and Spread Arbitrage.
Bybit Arbitrage offers several advantages, including the ability to trade with Both Legs orders, automatic Smart Rebalance to mitigate liquidation risks and access to over 80 assets as collateral for margin trading.
What Is Arbitrage Trading?
Arbitrage is the buying and selling of the same or similar asset(s) at the same time across different markets to earn from slight price deviations. This act of purchasing an asset at a fixed price — while simultaneously selling it at a higher price — allows a trader to instantly make profits without any risks.
While arbitrage trading has long been a staple in traditional financial markets, such as stock and forex, the advent of crypto trading has propelled arbitrage trading to new heights — thanks to the heightened volatility of the crypto market. Additionally, unlike traditional stock markets, crypto markets are traded 24/7, offering more opportunities for arbitrage traders to reap profits from the price gaps across exchanges and markets.
Crypto Arbitrage
You can choose to perform crypto arbitrage across exchanges or within a single exchange. Keep in mind that if you opt to arbitrage trade across different platforms, accessing your profits may prove to be complex, due to the need to transfer your assets between the exchanges, which can take up to several days to complete. On the other hand, arbitrage trading on a single platform is more straightforward — but more competitive as well.
There are multiple arbitrage trading strategies, but the most common ones in the crypto market include funding rates arbitrage, spot-futures arbitrage and futures arbitrage.
Funding rates arbitrage allows traders to profit from variations in funding rates between spot markets and perpetual futures contracts. In contrast, spot-futures arbitrage enables traders to profit from price disparities between the spot and futures markets for the same asset. Meanwhile, futures arbitrage involves profiting from price discrepancies between futures contracts with different expiration dates.
What Is Bybit Arbitrage?
Bybit Arbitrage is a trading tool that helps traders identify arbitrage trading opportunities in two ways: funding rate and spread. The user-friendly interface organizes trading pairs based on either funding rates or spreads in different markets, so that traders can easily spot disparities in funding rate or price across the markets at a glance.
Bybit Arbitrage is exclusively available to Unified Trading Account (UTA) users when in Cross Margin mode. It facilitates arbitrage trading for USDT Perpetual, USDC Perpetual and USDC Futures contracts, thereby allowing you to enjoy arbitrage trading opportunities between USDT Spot pairs and USDT Perpetual pairs, or USDC Spot pairs and USDC Perpetual/Futures pairs.
Key Features of Bybit Arbitrage
Funding Rate Arbitrage
The Funding Rate Arbitrage feature exploits differences in funding rates between the Spot and Perpetual/Futures markets on the Bybit exchange. With the Funding Rate feature, traders can earn funding fees while simultaneously managing their positions in order to minimize potential losses and maximize gains through positive and negative arbitrage strategies.
Funding rates for the different trading pairs are listed in descending order. This helps traders to easily leverage the interest rate differential between Spot and Perpetual/Futures contracts.
The Funding Rate feature also allows you to place Both Legs orders (with the same amount, but in different directions) in both Spot and Perpetual/Futures, which enables you to earn funding fees while mitigating potential losses (with potential gains).
In the event of a positive funding fee, long positionholders in Futures/Perpetual contracts pay short position holders. You can leverage this situation by executing a positive arbitrage, which involves buying a Spot pair and taking a short position in Futures/Perpetual to earn steady funding fees. Alternatively, if the funding fee is negative, short position holders pay long position holders. In this case, you would perform a negative arbitrage by shorting a Spot pair and going long in a Futures/Perpetual contract.
Spread Arbitrage
The Spread Arbitrage feature helps traders capitalize on price discrepancies between different markets for the same cryptocurrency asset. With this feature, you can easily compare the market prices of an asset traded across various trading pairs and contracts. While Spread Arbitrage may be similar to spot-futures arbitrage, it offers more arbitrage opportunities since it covers a broader range of markets, unlike spot-futures arbitrage, which targets specific markets.
With Spread Arbitrage, the aim is to profit from the eventual price convergence as you buy the crypto asset at a lower price in one market (e.g., Spot) and sell it at a higher price in another market (e.g., Futures). As the futures price will eventually align with the Spot price when the contract expires, you’ll be able to take advantage of the simultaneous price disparity for the same asset.
How to Trade With Bybit Arbitrage
In order to trade with Bybit Arbitrage, you’ll first need to upgrade your account to UTA. Currently, Bybit Arbitrage is exclusively accessible via the Bybit App. Keep a lookout for the web version, which will be launched soon!
After upgrading to UTA, you can head to the trading page, navigate to the Tools bar and select Arbitrage.
Next, choose your asset based on either Funding Rate or Spreads.
Place your Both Legs order. You can choose to go either short or long for your desired pair, and the system will automatically decide the direction of the second pair after you’ve decided on the first. Select either Market or Limit Order, and enter the Order Qty. Note that Smart Rebalance is enabled by default to offset the risk of one leg being executed while the other remains unexecuted for an extended period.
Click on Both Legs, and then Confirm to confirm your order.
View your active Arbitrage orders under Tools. When your order is fully filled, head to Tools History to review your order history.
Make sure to actively manage your position and assets after opening your order.
Advantages of Bybit Arbitrage
Bybit Arbitrage offers multiple advantages.
Arbitrage opportunities:Bybit Arbitrage gives you two types of arbitrage opportunities — funding rates and spreads.
Trade with Both Legs orders: Both Legs orders let you open positions in both Spot and Perpetual/Futures markets simultaneously. This allows you to earn funding fees by taking advantage of the funding rate difference between Spot and Perpetual/Futures contracts — even if the price doesn’t move in the direction you desire.
Smart Rebalance enabled by default: The Smart Rebalance feature helps to monitor the number of filled orders for both legs, and automatically places market orders to balance them. This reduces your exposure to liquidation risk.
Over 80 assets as collateral: Bybit’s UTA offers over 80 assets for you to use as margin for arbitrage trading, allowing you to leverage more assets effectively while reducing risks.
Closing Thoughts
Bybit Arbitrage is a powerful tool for traders seeking low-risk gains in the volatile crypto market. With its intuitive interface and exclusive features, traders can effectively leverage funding rate and price differences to maximize profits while minimizing risks. Bybit Arbitrage offers diverse benefits that make arbitrage trading more accessible and profitable than ever before.
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