Arbitrage

Arbitrage is profiting from price differences for the same asset across different markets by buying where it is cheaper and selling where it is more expensive. In principle the profit is low-risk because the two trades offset each other; in practice, speed, fees, and transfer frictions decide whether it works.

For example, if BTC trades at $60,000 on one exchange and $60,150 on another, an arbitrageur can buy on the first and sell on the second, capturing roughly $150 per coin minus fees. Doing this repeatedly pushes the two prices back together — arbitrage is the force that keeps prices consistent across the fragmented crypto market.

Crypto offers several arbitrage flavors: cross-exchange (as above), triangular (exploiting mispricing among three pairs on one venue), spot-futures basis trades (buying spot while shorting a futures premium), and cross-chain or DEX-versus-CEX opportunities. Competition is fierce: professional firms with colocated servers and pre-positioned inventory on many venues capture most gaps within milliseconds. A common misconception is that arbitrage is free money available to anyone with two exchange accounts; withdrawal delays, transfer fees, price movement during transfers, and stuck capital routinely turn apparent gaps into losses for manual traders.