Arbitraging Interest Rates

In addition to having an isolated trading environment, each venue also has its own lending environment. Differences in product offerings, rate mechanism, user base and other factors can lead to different rates across exchanges.

For example, Binance offers a centralized lending market, where users can borrow at the rate set by the exchange, or invest through one of their Earn products. Kucoin and Gate.io rely on Peer to Peer Lending Markets.

While someone is able to instantly profit from an arbitrage on price, an arbitrage on interest rates would take place over a longer timeframe. This arbitrage also comes with multiple risks including liquidation, needing to hold money in multiple platforms, and so on. Additionally, exchanges frequently have investment/borrow caps that limit the capacity of large market participants to enter the market.

Latest announcement on Binance Earn. With BICO at $0.38 and IDEX at $0.05, these products wouldn't allow a large market maker to participate significantly

These conditions provide opportunities for retail traders to earn yield by arbitraging interest rates across different markets, especially when including perpetual futures.