The exchange triangle method (or arbitrage triangle) is a strategy for making profits due to temporary differences in cryptocurrency rates on different trading pairs. This strategy is based on the idea of buying and selling three different cryptocurrencies within the same market or exchange to return to the original currency, but with more coins due to the difference in rates.
How the arbitrage triangle works:
1. **Purchase of cryptocurrency A for the base currency** (for example, buying BTC for USDT).
2. Exchange cryptocurrency A for cryptocurrency B** (for example, BTC for ETH).
3. exchange cryptocurrency B back to the base currency** (for example, ETH for USDT).
If the prices of different pairs are set in such a way that the amount of the base currency increases after the cycle is completed, the trader makes a profit. The main risk lies in the rapid change in rates, which can “destroy” the arbitrage window before all transactions are completed.
This method requires quick action, as arbitrage opportunities can disappear in seconds due to the high level of market automation.