Arbitrage

Arbitrage is profiting from a price difference for the same asset across venues or instruments: buying where it is cheaper and selling at the same time where it is dearer.

How it works

The simplest form is cross-exchange: BTC is cheaper on one exchange than another. There is also triangular arbitrage (a chain of trades across three pairs on one exchange) and spot-futures arbitrage, where you earn the basis or funding by holding opposite positions.

In practice the gaps are tiny and close fast, because bots with direct exchange access take them. Trading and withdrawal fees, slippage and transfer time eat the profit. While coins move between exchanges, price can change.

Arbitrage is often called risk-free, but it is not: withdrawals can be delayed or frozen, liquidity can run short, an exchange can go down, and in a spot-futures setup a sharp move can liquidate the futures leg.

Example with numbers 1

BTC is $60,000 on exchange A and $60,150 on exchange B. The gap is $150, or 0.25%. Fees: 0.1% to buy ($60), 0.1% to sell ($60), about $15 to withdraw. That leaves about $15 profit per BTC, if price does not move during the transfer.

Example with numbers 2

Spot-futures: BTC spot is $60,000 and the quarterly future is $61,200. You buy 1 BTC spot and sell the future. At expiry the prices converge, locking in about $1,200 (2%) minus fees, whichever way the market went.

Common mistake

A common mistake is trusting P2P arbitrage schemes from chat groups that promise guaranteed income. Many are a way to drag you into fraud or money laundering. Real arbitrage pays fractions of a percent and needs every fee counted before you trade.

Questions and answers

What is crypto arbitrage in simple terms?

You buy a coin where it is cheaper and sell it where it is more expensive. The profit is the price gap minus all costs.

Can a beginner make money with arbitrage?

It is hard: gaps are small and bots take them quickly. After fees and delays, the profit often disappears or turns into a loss.

Is arbitrage risk-free?

No. Transfers can be delayed, exchanges can fail, slippage happens, and a futures leg can be liquidated.

Arbitrage

How it works

Questions and answers

Related terms

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