Brick Strategy
GAEA Investment Research Center — “Brick Strategy” is a common strategy in digital currency trading. The basic principle is to buy a certain currency on a digital currency exchange with a relatively small amount of coins, and then sell the same amount of a certain coin on another exchange with a relatively high coin value to earn the difference.
Let’s take BTC as an example, we select the transaction prices of three exchanges for comparison at the same time.
Map（1）transaction price of BTC in different exchanges at a certain time.
It can be seen from the chart above that there is a 78 yuan gap per BTC between Binance and Huobi exchanges. Then you can do this:
Go to the Huobi exchange to charge and buy X BTCs;
Cash out X BTCs to the wallet and charge at Binance Exchange;
Selling X BTCs on the Binance Exchange;
Withdrawal the money or transfer to low-cost market recycling.
The problem is that it takes time for the exchange to withdraw, and sometimes it will encounter problems such as wallet maintenance. We can’t determine the time it takes to buy and sell the coins. When we are ready to move to another platform, the spread may be disappeared, so the risk of one-way bricking risk is still relatively large.
Of course, this doesn’t push you away from brick strategy, you can also hedge in both directions. To make sure the strategy can be executed smoothly, you need to prepare the digital asset and fiat in advance in the exchanges you want to do hedging.
For example, suppose you have 1 million dollars and 5 BTCs in Huobi and Binance. The current price in Binance is higher than that in Huobi, and than sell a BTC in Binance and buy a BTC in Huobi, thus the total amount of Bitcoin in your assets does not change, but the RMB balance increases. As long as the spread exists, the strategy can be repeated. Since the amount of coins held during the process remains the same, the risk can be controlled and the time to withdraw coins from exchanges can be saved. However, you have to stare at the market before you make money through this strategy.
Now that technology is applied to every aspect of our life, the brick strategy is not an exception. Let’s see how the software is implemented
- Choose the exchange and trading pair for hedging
- Pre-set the spread and the number of purchases, and than click to start arbitrage
- When the spread reaches the setting line, the system will buy and sell the digital asset at the same time, and arbitrage automatically to earn money through spread.
- Software is more likely to seize arbitrage opportunities, and lower the risk. There is a good news — GAEA trading tools will be officially launched later which including the brick arbitrage tool.
We have some tips for traders who use brick strategy.
1. Traders should choose exchanges with low transaction fee, and the spread between the two exchanges should be greater than the transaction fee.
2. Thaders should choose the transaction pairs that available in lots of exchanges, so that you can hedge in multiple platforms at the same time.
3. The exchange should choose the market with good depth. The maps (3) and (4) are the depths of the two major exchanges at the same time. Figure (3) is obviously better than the map (4), which is more suitable for hedging.
You must have some understanding of brick strategy after reading this article .
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Source Date: August 6, 2018
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