Arbitrage
Also called: crypto arbitrage · arb
Definition
Arbitrage is buying an asset where it is cheaper and selling it where it is more expensive at the same time, to profit from a price difference between markets.
This entry is shown in English.
How Arbitrage works
Crypto trades on many exchanges at once, and prices are not always identical. If BTC is slightly cheaper on one venue than another, an arbitrageur buys on the cheaper one and sells on the more expensive one. Their trades push the prices back together, which helps keep markets consistent.
There are several types. Spatial arbitrage uses price gaps between exchanges. Triangular arbitrage cycles through three pairs on one exchange, such as USDT to BTC to ETH and back. Funding rate and basis arbitrage pair a spot position with a futures position to collect a funding payment or a price gap while staying market-neutral.
Real-world arbitrage is harder than it looks. Trading fees, withdrawal fees, network confirmation times, deposit and withdrawal suspensions and slippage can wipe out a small gap. Professional firms keep funds on several exchanges in advance so they do not have to transfer during the trade. Regional price premiums can also persist for long periods because of capital controls.
Example
Suppose ETH trades at 3,000 USDT on exchange A and 3,018 on exchange B, a 0.6% gap. You hold funds on both and buy 2 ETH on A for 6,000 USDT while selling 2 ETH on B for 6,036 USDT. Gross profit is 36 USDT. With taker fees of 0.1% on each side, you pay about 6 + 6.04 = 12.04 USDT, leaving roughly 24 USDT. If you also had to withdraw ETH between venues, a network fee would cut that further.
Common mistakes
- Forgetting withdrawal fees and transfer time when the gap is only a fraction of a percent.
- Assuming a price gap is free money when deposits or withdrawals are suspended on one side.
- Leaving one leg of the trade open, which turns arbitrage into an ordinary directional bet.
Learn and practise
FAQ
Is crypto arbitrage still profitable?
Large, easy gaps are rare on major pairs because many bots compete for them. Smaller opportunities exist, but costs and execution speed decide whether they are worth it.
Is arbitrage risk-free?
No. Execution delays, fee changes, frozen withdrawals and exchange risk can all turn an expected profit into a loss.