## Why Cryptocurrency Arbitrage No Longer Yields High Profits: Market Saturation Analysis

Once a highly profitable strategy, cryptocurrency arbitrage between spot assets and perpetual futures is experiencing a serious crisis. According to an analytical report, by mid-2024, the annual return of this approach has fallen below 4%, less than half of the yield of US Treasury bonds. This dramatic decline contrasts with the bullish market periods when similar strategies generated profits above 25%.

### How Algorithmic Traders Changed Market Dynamics

The sharp decline in profitability was caused by the widespread adoption of automated trading systems. A large number of algorithmic trading operations disrupted price discrepancies that previously allowed profit extraction from differences between spot and futures markets. Projects like Ethena, which extensively implemented this strategy, simultaneously contributed to its proliferation and its decline.

### Consequences: Reduced Funding Rates and Signs of Market Maturity

An excess of capital involved in a single strategy led to an imbalance in market dynamics. On major cryptocurrency exchanges, funding rates began to decline, reflecting an oversupply of liquidity on long positions. This phenomenon indicates the growing maturity of the crypto market, which is gradually aligning with traditional financial markets in terms of efficiency and reducing arbitrage opportunities.

### New Directions for Traders

In response to changing conditions, professional traders and asset managers are shifting focus to alternative approaches. Inter-exchange cryptocurrency arbitrage, trading new derivative instruments, and other strategies are gaining increased attention as potential sources of income amid the market reformatting.