Arbitrage opportunities are often fleeting, as the exchanges are reacting faster and faster to imbalances. This leads me to believe that there are arbitrage bots working out there, they are just not being shared with us.
Because these opportunities have to be capitalized on so quickly, (often 60 seconds or less), some automation is needed to make it work. Even with the block on actual transfers between the exchanges, this could be accomplished thusly:
1. A major trade occurs on GOX sending the exchange price into sufficient imbalance that a profit can be made.
2. The bot senses that GOX>BTC-e & GOX BTC/LTC ratio > BTC-e BTC/LTC ratio, so it triggers a sale for a predetermined amount of BTC-to-LTC on GOX while simultaneously buying an equal amount of BTC-from-LTC on BTC-e.
3. A message (email or txt) goes out to the trader to manually transfer the traded amount of BTC to GOX & LTC to BTC-e. Once this occurs, the system is "recharged", and can fire again the next time the exchange bounces out of step with the other.
As we speak, the price of BTC is $8 more on GOX then on BTC-e. The bot would see this, confirm that the BTC/LTC ratios are equal or at least friendly, and sell the 100 BTC I have sitting on gox into LTC and the equal amount of LTC into BTC on BTC-e. I have to sit down & recharge the system by manually sending 100BTC back to GOX & the equivilant in LTC back to BTC-e, but I made $800 minus fees for my effort.
Make sense lol?
+1 What Sean just said.
I think that starting out with an arbitrage alert bot is an excellent start, however the manual transfers might kill the opportunity.
Getting an ArbBot off the ground before Gox implements LTC might work tremendously towards our advantage in getting us, as Sean said "ahead of the curve". I don't know about you folks, but I have NEVER been fortunate enough to be ahead of any curve.
I'd be willing to donate towards the project to get it started.
Can we roll with this?
