Crypto arbitrage is a trading strategy that takes advantage of price discrepancies across different exchanges. This guide introduces the concept, its main types, and the tools required to execute profitable trades.
There are several forms of arbitrage, including spatial arbitrage (buying on one exchange and selling on another), triangular arbitrage (exploiting price differences between three trading pairs), and statistical arbitrage (using algorithms to identify inefficiencies). Successful execution requires speed, capital, and low transaction fees.
How It Works
Traders monitor exchange prices using bots or APIs. When a difference arises, they execute simultaneous buy and sell orders to lock in profit. High volatility and market inefficiency create these short-term opportunities.
Risks
Arbitrage profits can shrink due to slippage, withdrawal delays, or sudden price corrections. Always factor in fees and network congestion. Regulatory barriers in some regions can also limit access to certain exchanges.
Conclusion
Crypto arbitrage offers low-risk, small-margin gains when executed efficiently. Automated tools, risk management, and real-time data are essential for consistent success.