fake wind prices down quite a bit market's been rough lately now searching for the safest ways to earn passive income in crypto even if token prices are falling faster than bambi on ice and i found it a strategy that doesn't care if bitcoin is up 50 or down 20 this is spot futures arbitrage bots and don't worry if that sounds intimidating within the next couple of minutes i guarantee you'll have an aha moment and until then just think of these bots as automated fee collectors that don't give a rats if the market is up or what elon is tweeting first let's set up some bots so i can show you my profits later in the video i'm using pinex to do all this which is linked in the description below on pinex i'm gonna click earn and then moderate mode because this is the safest mode to use these bots i'm gonna put two thousand dollars into this spot click create and we're good to go then i'm gonna test out a few in aggressive mode going with bitcoin first two thousand dollars into the bitcoin bot and i'm going to leave that on 2x leverage click create and wait for that to set up now this can take a while to set up especially for smaller coins and i'm also going to set up three additional aggressive bots to add a little bit of spice to this experiment we're going to go with avax vet and doge the total amount invested is just shy of ten thousand dollars and believe it or not these bots can make up to 50 apr with very little risk but that begs the question how does it work what are spot futures arbitrage bots and why couldn't they come up with a more catchy name let's break this down piece by piece first arbitrage arbitrage is the practice of buying and selling the same asset in different markets for a profit a fascinating example is sam bankman free the 29 year old worth 22 billion dollars he made a huge chunk of money in crypto early through crypto arbitrage he noticed that due to demand for bitcoin in korea prices of a single bitcoin could trade for as much as 50 percent higher than u.s prices this meant he could buy a bitcoin for ten thousand dollars in the us and offload it for fifteen thousand dollars in korea but this had issues regulations were tight and it was hard to offload a ton of money so he eventually moved over to japan japan had a lower premium at only 15 but he could move much more money this resulted in him making quote literally 10 per weekday which is absolutely insane so in summary arbitrage is profiting off of price differences of the same asset but the whole title is spot futures arbitrage bots so what are spot futures arbitrage bots in this context in this case it refers to the markets you are invested in through this bot when investing in one of these bots you are actually buying two different assets a spot position and a futures position the spot position is no different than a regular old buy if you flat-out bought 100 in bitcoin this would be a spot position also referred to as a long position a futures position on the other hand is a bet on the future price of an asset a futures position can be long or short a long futures position is similar to a spot position in that you're betting that prices will go up in the future a short position is a bet that prices will go down you make money if the price decreases on a short position a purchase into one of these bots splits the buy between spot and short in the market and this has a fascinating result it's very hard to lose money when you do this so let's say you invested one thousand dollars into one of these bots five hundred dollars would be similar to a regular buy a bet that prices will go up five hundred dollars would be short i'll bet that prices will go down the result is your investment dollar amount never changes much because if prices go up your long position makes money if they go down your short position makes money meaning your one thousand dollars stays right around one thousand dollars now you're probably wondering how is it possible to make any money if you're betting with and against the market at the same time it sounds like something a crazy person would do but this is where arbitrage comes in so let's piece this together spot futures arbitrage bot we know spot in futures are the types of buys that we're making betting for and against the market at the same time we know arbitrage is profiting off of price mismatches and bot of course just means a program that does everything for us so we don't have to sit at the computer and monitor things all day like some kind of hermit so what is the arbitrage where does the profit actually come from well this is from something called the funding fee also referred to as the funding rate this is a fee paid to holders to help ensure market prices are exactly where they should be the thing is traditionally in futures markets there's an expiration date meaning you could buy a futures position betting on the future price of an asset but that position would eventually expire usually this is done quarterly or monthly the reason for this is prices can get way off track regular buy and sell pressures in the market can make the spot price and the future price of an asset vastly different over time an expiration date essentially creates a reset button so prices are set back on track but this comes with an issue investors have to constantly re-up their contracts if they want to stay in those positions and that's why perpetual contracts were created futures contracts that never expire but because they never expire there needed to be a way to keep prices between the regular market and the futures market in line they need to be right around the same price it's easiest to think of this like a balancing scale you have long positions on one side and short on the other whenever prices decrease too far on one side a funding fee is kind of sprinkled on top to incentivize investors to move over to that side and this funding fee can be quite high it can get as high as one percent daily in large bull runs here's an example of a funding fee at point four percent every eight hours meaning if you had ten thousand dollars invested you would make 120 dollars per day nearly risk-free and that's because the beauty of these bots is you are market neutral you don't make or lose money no matter where the market heads but you still earn that funding fee now one percent daily isn't normal but it's fairly common to make 15 and up to 50 apr urgent intermission so my bots have been running for about a week now and i ran into an issue the crypto markets have absolutely been crashing with major cryptos down 30 to 50 percent and this has thrown a wrench into my plan now i think it's important to be transparent and show how much i've actually made so far here are the bots the good news is all of them are positive except for one doge with doge i'm down less than a dollar though so in the last week i only profited four dollars in six cents on nine thousand seven hundred six dollars that comes out to about a two point two percent apr which of course isn't ideal now i'm not mad about that because in the last week if i just held those five cryptos outright i would have lost over seventeen hundred dollars so making four dollars i'll take that any day over losing 1700 but this highlights the need for a new strategy and this begs the question why did this happen i thought that these bots were market agnostic let me explain so remember the balancing scale between regular sellers and short sellers right now because cryptos are crashing this has led far more investors to sell short betting that the market will go down further tipping the scales and decreasing the funding fee temporarily looking back at my bots you can see that the funding fee is actually negative right now and this is pretty rare according to pioneex's documentation this only happens about 10 percent of the time now it's not the end of the world because i still make money if the fee is slightly negative but unfortunately sentiment dramatically impacts funding rates here we can see a piece of research from finance that shows funding rates increase and decrease with the price of bitcoin which makes total sense if you think about it because funding rates are a market equalizer they are needed most when there's a ton of demand on one side to go ahead and equal out those balancing scales because of this i'm going to stop my aggressive bots and i'm going to place all of that money into the moderate bot the reason being that rates are actually higher in the moderate bot right now it's also important to note that the funding rates that you see are paid out every eight hours now from here i'm going to report back on the profits with this entirely new strategy now spot trade arbitrage bots are very low risk compared to most things in crypto but that doesn't mean there is zero risk with the moderate bot especially there is about as close to zero risk as you can get the only thing i can think of is some kind of api issue or bug in code that could cause some problems however this has a very very low probability with aggressive bots there's slightly more risk because you're taking on leverage this means there's a small chance of being liquidated if the price of your crypto for some black swan reason dropped extremely quickly and then the bot failed to rebalance the position what i like about pinex though is they have an insurance fund in case of rare events pinex charges 10 of profits for running these bots but half of that goes to their safu fund basically this fund is there in case a cataclysmic event happens the results of the experiment are in after the first day i was already on a better track profiting two and a half dollars day one which of course doesn't sound groundbreaking but that's like a nine percent annualized return more than something like the s p 500 with next to zero volatility risk from there the market downtrended a bit more and rates slightly decreased after 10 days the total profit came up to 15 or about 5.5 percent annualized return again i can't be mad because crypto in that time dropped faster than like a fat kid down a water slide and so i'm excited that i made money when the market was down and i'm even more excited that when the market goes back upwards i will make far more than five percent apy that's because a friend of mine who put me onto these bots averaged 27 apy over 400 days on this type of bot so that means during a bear market it might take as much as six hundred thousand dollars to profit 100 a day but averaged over time at 27 apy it would take more like 135 000 invested of course this can be scaled down to any investment size in order to make one dollar profit per day you'd only need 1 350 invested according to these numbers so again i'll have these bots linked in the description below from here if you're interested in other crypto passive income ideas check out this video on screen and i would like to thank you so much for watching and i hope you have a profitable day
