Wish or reality? On the exploitability of triangular arbitrage in cryptocurrency markets

This study investigates the efficiency of cryptocurrency markets by examining the presence and exploitability of arbitrage opportunities. Using high-frequency data from the Binance Exchange, we implement a triangular arbitrage strategy, considering Bitcoin, Litecoin, and the U.S. Dollar. We find 4,879 possible arbitrage opportunities. Although these findings suggest potential inefficiencies, transaction costs and limited trading volumes in the order book eliminate their profitability. Consequently, centralized cryptocurrency markets exhibit a high degree of efficiency. Moreover, our results suggest that the mere number of triangular arbitrage opportunities is not a reliable indicator of market inefficiency. • Triangular arbitrage opportunities at cryptocurrency exchanges do exist. • Transaction costs, potential slippage and limited trading volumes in the order book eliminate their profitability. • Centralized cryptocurrency markets exhibit a high degree of efficiency. • The mere number of triangular arbitrage opportunities is not a reliable indicator for market efficiency.