macrocephalopod

cc @macrocephalopod: is this this an example of the cross exchange liquidity quants can exploit? Seems to be a pretty big big/ask spread for orders larger than 0.1 BTC. How do you hedge for stablecoin depegging?

I am not completely sure what I’m being asked here!

if there's money to be scalped on thin order books and bid/ask spreads, why is coinbase volume falling seemingly by the day? And isn't cross exchange (eg making money off spot delta between Coinbase and say FTX) a big source of potential? If so, why is it not happening and

how do you even account for the risk between something like USD on coinbase (close to 100% safe) and Tether or USDC as the medium of trade on other exchanges? It's not a simple question lol I'm just curious about what the big quant possibility is here

I think volume is falling because volume is correlated with retail interest, which is correlated with price. Price is down so volume is down too! As you point out it's hard to do cross-exchange arb with a pure taking strategy because bid/offer is wide and commissions are high.

To arb spot effectively you ideally want to get filled passively on one of the legs, so you collect spread and pay a reduced fee. You then cross spread to hedge on the other exchange. But getting filled passively requires volume!

Volume helps in two regards - first it creates opportunities (e.g. a big trade on one exchange pushes up the price there) and second it gives better passive entry opportunities. Lower volume means less profit for arbs.

Stablecoin unpeg risk is hard. You could either try to maintain a flat delta to USDT naturally (but that means a lot of opportunities are not available to you) or you could explicitly borrow USDT and sell it for USD as a hedge, but borrowing USDT is expensive.