From Liquidity to Profits: How Smart Arbitrage Maximizes Crypto Returns

In crypto, where prices change every second and liquidity determines the viability of a project, market making is far from just a technical function; it is a full-fledged strategic tool.

In particular, one of the key market making strategies for crypto projects is arbitrage, which helps increase market depth, reduce spreads, and activate traders.

At the same time, it opens up special opportunities for arbitrageurs: they use the price difference between exchanges or trading pairs to generate stable income while supporting the market. 

Market Making as a Profit Catalyst: Everyone Wins on the Market

Market making is becoming profitable for a reason — special programs on crypto platforms play a key role here. They create favorable conditions not only for exchanges or projects, but also for arbitrageurs themselves.

Such programs often provide reduced or even zero trading commissions for those who provide liquidity. As a result, arbitrageurs can carry out hundreds of transactions without significant commission costs — this is especially important for strategies with small but frequent profits.

Another bonus is the developed market-making infrastructure with low latency. For arbitrageurs, this means literally ‘playing in milliseconds’: accessing the most favorable prices in real time and instantly locking in profits while the spread is still relevant.

In essence, market making acts as a catalyst for efficiency: it reduces trading costs, accelerates capital turnover, and makes the market more stable. As a result, everyone wins — traders get stable conditions for arbitrage, exchanges increase trading volumes, and the market as a whole becomes deeper and more predictable.

Choosing an Exchange as a Strategy: A Practical Look at Market Making Programs

Recently, I decided to check how profitable arbitrage can be for traders in market maker programs on different exchanges. First, I analyzed the terms and conditions of programs on leading platforms and compiled my own conditional rating.

1. Bybit offers different rates of rebates based on trading volume. For spot trading, the maker fee can range from -0.001% to -0.0075%, and for futures, from 0.0028% to -0.0125%. Additionally, there is a program available for connecting market makers to projects that require liquidity. 

1. WhiteBIT offers low fees and rebates of up to -0.012%. This applies to both spot and margin trading and provides additional benefits: colocation, sub-accounts for strategy management, fast API with WebSocket, FIX, and webhook, as well as 24/7 personal support.

1. Binance offers rebates on trading fees, where the top participant can receive up to 0.005% off trading fees, and the next four participants up to 0.002%. Additional benefits include 0% maker fees on selected trading pairs and increased API rate limits for all participants.

1. Bitget provides rebate structures, with maker fees ranging from -0.005% to -0.015%, depending on monthly trading volume tiers. Participants also receive exclusive account benefits such as increased subaccount and API limits, along with dedicated technical support.

1. Gate.io offers market maker rebates of up to -0.015%. Participants gain access to the Gate Market Maker Protection (MMP) system and can apply for interest-free loans of up to 400,000 USDT to scale their trading activities. Additionally, 24/7 personal technical support is available. 

Taking into account the conditions and additional tools for comparing potential income, I settled on the top two exchanges — Bybit and WhiteBIT.

For the case study, I took two hypothetical market makers: trader A on WhiteBIT and trader B on Bybit, with a trading volume of $5 million per month on the BTC/USDT and ETH/USDT pairs. The strategy is simple: buy on one exchange and sell on another, taking advantage of the price difference.

So, according to my rough calculations, a trader can earn about 0.25% of the arbitrage volume, excluding commissions, or $12,500 per month. Adding WhiteBIT's rebate of approximately $600, the net result can be around $13,100 per month.

At the same time, based on the same hypothetical profit of $12,500 without fees and adding an average Bybit’s commission rebate of around $250, the net profit could be approximately $12,750 per month.

Based on these calculations, WhiteBIT has a slight advantage due to rebates and bonuses for fast order execution, while Bybit offers greater flexibility and the ability to integrate with projects that require liquidity.

So, if you're planning to get into arbitrage, it's important to look at not just fees, but also order execution speed, API quality, and extra bonuses from market maker programs. 

Before You Make Markets — Make The Right Choice

Picking the right exchange and program can make your arbitrage strategy consistently profitable, even with moderate trading volumes. Here are some key factors to consider when choosing a platform.

• Reputation and reliability. Liquidity without trust is worthless. Choose exchanges with transparent operations, stable trading volumes, and an impeccable reputation. It is useful to check audits, real cases, and user reviews to ensure the reliability of the platform.

1. Liquidity depth and trading volume. Depth shows available liquidity, while volume shows actual activity. It is best to trade on exchanges with strong pairs and balanced orders at different price levels.

1. Fees and cost structure. The difference between maker and taker fees can significantly impact your profitability. Study not only the base rates, but also hidden costs or possible rebates for large trading volumes.

1. Supported assets. Even the most reliable exchange will be useless if it does not support the cryptocurrencies or trading pairs you need. Check for the availability of assets that are important to your strategy.

API Integration and Quality.

Technical compatibility is crucial for market makers. An exchange with a reliable API, fast access to real-time data, and minimal delays in order execution will ensure the effectiveness of your strategies.