2. Problem Description

Along with the new disruptive technological opportunities, also new issues are also occurring and have to be taken into account. Because of the lack of liquidity for certain pairs, price manipulations and the high amount of non-professional traders, the cryptomarket generally can be declared as extremely volatile. This leads to inefficiencies, where prices are highly varying between exchanges, especially when analyzing pair chains. Among various factors, this is one of the most important reasons why institutional investors are still worried about entering the crypto area, which hinders the technology from evolving. In order to stabilize these inefficiencies and benefit from potential arbitrage possibilities a lot of technical solutions and administrative workflows have to be implemented.

The complex web of exchanges, which includes different means of funding, KYC policies, API results and interfaces, increases the administrative and technical effort to set up an appropriate arbitrage system. Furthermore, users have to open accounts on multiple exchanges in order to benefit from price spreads. For a fully automated arbitrage trading setup various factors have to be considered e.g. transaction time, transaction fees, authenticity of orders in their books, volume, withdrawal limits, etc. This data is provided by exchanges and Future Gold Arbitrage obtains it through their custom Application Programming Interfaces (APIs). However, currently this data is not normalized and standardized. Therefore, working with market data streams from different origins requires specific processing and reformatting of the data into standardized data structures, in order to be able to perform automated analysis of best pricings and liquidities per exchange, to spot truly profitable arbitrage possibilities. Moreover, the problem of latency needs to be tackled, as time is a key factor when it comes to arbitrage trading. Fast internet connections as well as physical proximity are required, so that the necessary speed can be achieved.

Setting up the infrastructure for an individual is very costly, time consuming and needs a lot of expertise in financial markets as well as information technology systems. Furthermore, a lot of capital is needed to ensure the liquidity on relevant exchanges, in order to be able to act as fast as possible. Therefore, Future Gold Arbitrage is offering its services to allow individuals of any kind to join pools for profitable arbitrage trading. At the same time, through aggregation of capital, Future Gold Arbitrage will be able to invest in and improve the infrastructure, and keep sufficient funds on relevant exchanges at all times, so that the most profitable arbitrage trading opportunities can be realized