CoinDesk Analysis Team
CoinDesk
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OKX automates execution of the "funding rate arbitrage" strategy.
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The new offering allows traders of varied experience levels to maximized returns, OKX said.
OKX, the world's third-largest crypto exchange by trading volume, announced a new automated execution facility for the bi-legged crypto arbitrage strategy, opening doors for retail investors to maximize returns.
The latest update allows eligible users of OKX's Arbitrage bot to bypass complexities involved in the simultaneously placing opposing positions in spot and perpetual futures. Traders use this method to from pricing discrepancies between the two markets, the press release shared with CoinDesk said.
The placement of these positions in markets tied to bitcoin (BTC) and several other cryptocurrencies is now automated through built-in AI, making the otherwise sophisticated strategy accessible to traders with varied levels of experience.
The market-neutral strategy has been quite popular among sophisticated traders since at least the 2020 bull run. The typical trade involves buying the cryptocurrency in the spot market and selling perpetual futures contracts when the latter trades at a premium to the spot price. That way, the arbitrageurs collect the funding fee from holders of long (bullish) perpetual positions while bypassing price volatility risks. The strategy has previously offered annualized returns of over 20% during price uptrends.
Automated execution can now help OKX's retail investors pocket similar returns.
The smart mode of the exchange's arbitrage bot automatically recommends the optimal strategy, managing the execution of entry and exit and position adjustment. The custom mode allows traders to select strategies based on their research.
"With this enhanced Smart Arbitrage bot, we continue to lead the way in providing automated, intuitive trading solutions that empower traders of all experience levels in the crypto market. By introducing further automations, we've improved the accessibility and ease of executing sophisticated strategies like arbitrage," Lennix Lai, global chief commercial officer at OKX, said.
Other exchanges like Binance also offer automated execution of the arbitrage strategy.
All writers’ opinions are their own and do not constitute financial advice in any way whatsoever. Nothing published by CoinDesk constitutes an investment recommendation, nor should any data or Content published by CoinDesk be relied upon for any investment activities. CoinDesk strongly recommends that you perform your own independent research and/or speak with a qualified investment professional before making any financial decisions.
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