During my internship at Blue Coast, I designed and implemented a high-frequency cross-exchange market making strategy targeting price inefficiencies between Bybit and MAX, a local crypto exchange in Taiwan. By leveraging liquidity disparities and execution speed, the strategy generates consistent, low-risk returns in the volatile cryptocurrency market.
The core of the strategy is a Liquidity Provision and Hedging model. Unlike traditional arbitrage that waits for price gaps to widen, this market maker actively creates the market on the maker exchange while maintaining a neutral posture on the taker side.
Market Making (MAX): The system continuously places limit orders on the MAX exchange. This provides liquidity to the local market and captures the bid-ask spread.
Instant Hedging (Bybit): The moment an order is filled on MAX, the system triggers a lightning-fast market order on Bybit to offset the position.
Profit Capture: Revenue is derived from the spread difference between the two platforms and the capture of localized price premiums. While individual trade profits are tiny, the high-frequency nature of the system allows these gains to compound into a 100% APY.
My research focused on identifying trading pairs with high "mean-reverting" price gaps and sufficient depth to support automated execution without significant slippage. The strategy is optimized for high-volume pairs including BTC/USDT, ETH/USDT, SOL/USDT, DOGE/USDT, ADA/USDT and XRP/USDT.
To achieve institutional-grade execution speeds, the strategy is deployed on AWS Singapore (ap-southeast-1). This specific region was selected for strategic collocation:
Proximity to Matchmakers: Both Bybit and MAX utilize data centers within the Singapore region. By hosting the execution engine in the same geographical area, the system achieves 2~5 milliseconds round-trip time.
Minimized Slippage: In high-frequency market making, every millisecond of delay increases the risk of the price moving against the hedge. Collocation ensures that the market order on Bybit is processed almost instantly after the limit order on MAX is filled.
Order Book Synchronization: Real-time WebSocket integration for monitoring micro-spreads across exchanges.
Inventory Management: Automated rebalancing logic to ensure the strategy always has sufficient capital on both sides of the trade.
Automated Monitoring: Integrated a Telegram bot directly into the execution engine, which reports daily PnL summaries, trade counts and volume metrics.