Triangular Arbitrage

Category: finance

A strategy that exploits price discrepancies between three different currency pairs to generate a risk-free profit.

Common in Forex, it relies on the mathematical consistency of cross-rates. If BTC/USD, BTC/ETH, and ETH/USD prices don’t align, a trader can swap BTC to ETH, ETH to USD, and USD back to BTC, ending with more BTC than they started with. It is a closed-loop transaction chain performed in a single execution sequence.

Common Examples

• Triangular arbitrage opportunities on decentralized exchanges are often captured by MEV-bots (Maximal Extractable Value) before a human trader can even see the price gap.
• We mapped the entire cross-currency matrix to detect triangular arbitrage opportunities that satisfy our minimum-profit-margin threshold after gas fees.