How to do arbitrage on Bisq

Arbitrage is the practice of simultaneously buying and selling an asset in different markets (or in different forms within the same market) to profit from a temporary price difference. In inefficient or less liquid markets, like many peer-to-peer environments, arbitrage opportunities can arise more frequently.

Arbitrageurs play a necessary role by taking advantage of these inefficiencies. In doing so, they not only profit but also help improve market liquidity and price discovery, making the market more efficient for everyone. Bisq currently provides many arbitrage opportunities.

Version Context: The examples and considerations on this page primarily relate to arbitrage involving the classic Bisq v1 trading protocol. Arbitrage mechanics may differ significantly with the newer Bisq Easy protocol (detailed on the Bisq 2 page), which is not the focus of this guide.

Disclaimer: The price examples below are purely illustrative using hypothetical market conditions (approx. €80,000-€90,000 BTC/EUR) and plausible spreads. Real prices and spreads fluctuate constantly. Successful arbitrage requires accounting for all fees (trading, mining, payment method) and risks.

Types of Arbitrage on Bisq

You can perform two main types of arbitrage involving Bisq:

Inter-Exchange Arbitrage

This involves finding price differences between Bisq and another exchange or market (Market X).

Example:

1. You observe that the lowest price to SELL Bitcoin on Bisq's EUR/BTC market is currently €85,500.
2. Simultaneously, you find you can BUY Bitcoin on Market X (e.g., a centralized exchange) for €85,100.
3. You execute both trades at roughly the same time: Buy 1 BTC on Market X for €85,100 and Sell 1 BTC on Bisq for €85,500.
4. Assuming successful execution, this yields a potential profit of €400 per BTC, before accounting for any fees (trading, withdrawal, mining, payment method).

(The reverse is also possible: buying cheaper on Bisq and selling higher elsewhere).

Intra-Exchange Arbitrage

This involves exploiting price differences *within* the Bisq platform itself. This can happen between different currency markets or different payment methods within the same currency market.

Cross-Currency Arbitrage

If the implied cross-rate between two fiat currencies (e.g., USD and EUR) differs from the prevailing market rate, an opportunity might exist.

Example:

1. You notice the relative price in Bisq's USD/BTC market (e.g., equivalent to €86,000) is higher than in Bisq's EUR/BTC market (e.g., €85,000).
2. You simultaneously SELL BTC for USD (at the higher relative price) and BUY BTC for EUR (at the lower relative price) on Bisq.
3. If done correctly with sufficient volume, you can lock in a profit based on the temporary price discrepancy between the two Bisq markets (factoring in fees and the actual EUR/USD exchange rate).
4. Repeat as long as the profitable spread exists.

Payment Method Arbitrage

Different payment methods within the same currency market (e.g., EUR) might have different prices due to varying user preferences, risks, or settlement times associated with those methods.

Example:

1. You see offers available to BUY Bitcoin using SEPA priced relatively low (e.g., at €85,200).
2. At the same time, you see offers available to SELL Bitcoin receiving payment via Revolut priced higher (e.g., at €85,800).
3. You simultaneously execute both: BUY 1 BTC using SEPA for €85,200 and SELL 1 BTC receiving Revolut for €85,800.
4. This yields a potential profit of €600 per BTC arbitraged between the two payment methods on Bisq, before accounting for fees.
5. Repeat as long as the profitable spread exists.

Risks and Considerations

While arbitrage aims to be low-risk by locking in profits from existing price differences, several practical factors introduce risk and complexity, especially on a P2P platform like Bisq:

• Execution Risk: Prices can change quickly. Delay in executing one leg of the arbitrage (e.g., your external market buy fills but your Bisq sell offer gets taken by someone else before you can place it, or vice-versa) can erase the profit or lead to a loss. Getting both sides filled simultaneously at the desired prices can be challenging.
• Fees: Remember to account for all fees:

   * Bisq trading fees (maker/taker, paid in BTC or BSQ).
   * Bitcoin mining fees (for deposit and payout transactions in Bisq v1).
   * Fees associated with the specific payment methods used (both on Bisq and external exchanges).
   * Fees on the external exchange (Market X).

• Capital Requirements: You need sufficient capital available on both platforms/payment methods simultaneously to execute both legs of the trade (BTC and/or fiat).
• Counterparty Risk (Bisq v1): While security deposits mitigate risk, trades can still go to dispute resolution, potentially tying up your funds (including deposits) for some time. Ensure you understand the risks associated with the specific payment methods and trade protocol.
• Settlement Times: Fiat payment methods have varying settlement times. An arbitrage might require managing cash flow across methods that settle at different speeds.

Successful arbitrage requires careful calculation, quick execution, and a good understanding of the platforms and payment methods involved.

• For more short guides see Howto. You can also find support on Matrix.