Spatial Arbitrage: Cross-Exchange Price Discrepancies

Spatial arbitrage exploits price differences for identical assets trading across multiple cryptocurrency exchanges. This strategy is based on the law of one price - in efficient markets, the same asset should trade at equivalent prices when adjusted for trading costs and transfer fees. However, market fragmentation, varying liquidity levels, and differing trader compositions create persistent price discrepancies that can be systematically exploited.

Theoretical Foundation

Cryptocurrency markets operate across hundreds of exchanges worldwide, each with its own order book, liquidity profile, and trader base. While blockchain technology ensures asset fungibility, exchange-specific factors create price divergences:

• Liquidity Differences: Exchanges with deeper order books tend to have tighter spreads and more stable prices

• Market Maker Activity: Varying levels of professional market making across platforms

• Information Asymmetry: News and order flow reach different exchanges at different times

These factors create arbitrage opportunities where the same cryptocurrency (e.g., BTC) trades at different prices simultaneously across exchanges.

Calculation Methodology

The arbitrage engine employs real-time cross-exchange price comparison with comprehensive cost modeling:

Price_Differential = Sell_Exchange_Bid - Buy_Exchange_Ask
Gross_Return_% = (Price_Differential / Buy_Exchange_Ask) × 100
Net_Return_% = Gross_Return_% - (Buy_Fee_% + Sell_Fee_% + Transfer_Cost_%)
Profit_per_BTC = (Net_Return_% / 100) × Buy_Exchange_Ask

Aster → Backpack Arbitrage:

• Buy @ Aster Ask: $114,120.00

• Sell @ Backpack Bid: $114,285.00

• Price Differential: $114,285.00 - $114,120.00 = $165.00

• Gross Return: ($165.00 / $114,120.00) × 100 = 0.145%

• Buy Fee (Aster): 0.035%

• Sell Fee (Backpack): 0.100%

• Total Fees: 0.135%

• Net Return: 0.010%

• Profit per BTC: $11.41

Cross-Exchange Optimal Route:

• Buy @ Lighter: $114,095.00

• Sell @ Backpack: $114,285.00

• Price Differential: $190.00

• Gross Return: 0.167%

• Lighter Fee: 0.001%

• Backpack Fee: 0.100%

• Total Fees: 0.101%

• Net Return: 0.066%

• Profit per BTC: $75.32

Exchange Pair Analysis

The system analyzes arbitrage opportunities across all exchange combinations:

• Aster ↔ Backpack:

  • Most liquid pair with high trading volume

  • Often exhibits smallest price discrepancies

  • Fast execution due to proximity and similar market structure

• Aster ↔ Lighter:

  • Lighter specializes in perpetual futures

  • Price discovery differences between spot (Aster) and (Lighter)

  • Best funding opportunities

• Backpack ↔ Lighter:

  • Both derivatives-focused exchanges

  • Funding rate impacts create additional bonus

  • Smaller spreads but higher volatility in opportunities

Fee Structure and Transfer Costs

Cross-exchange arbitrage involves multiple cost components:

Trading Fees:

• Buy Exchange Taker Fee: 0.035% (Aster) to 0.05% (Backpack)

• Sell Exchange Taker Fee: 0.035% (Aster) to 0.05% (Backpack)

• Total Trading Fees: 0.07% to 0.08% per round trip

Transfer Costs (Not Included in Current Model Just for Lighter):

• Network Fees: Vary by blockchain

Execution Strategy

The arbitrage execution requires precise coordination:

1. Price Discovery: Identify profitable price discrepancy

2. Order Placement: Submit limit orders on both exchanges simultaneously

3. Asset Transfer: Move assets between exchanges (if required)

4. Position Closure: Close positions for profit realization

5. Risk Monitoring: Continuous monitoring of price convergence