Crypto arbitrage is a trading strategy that uses crypto price discrepancies between exchange platforms to profit, buying an asset at the lowest price and reselling it at a higher price.
Crypto arbitrage is a common trading strategy that refers to buying and selling cryptocurrencies on different exchanges at different prices to make a profit. Its purpose is to profit by exploiting the differences in price for the same asset on various platforms.
The prices of cryptocurrencies can vary from platform to platform because cryptocurrencies are highly volatile digital assets with no standard cost.
The primary skills of an arbitrager are
to monitor prices on multiple markets, find the price gaps, and be able to exploit them quickly before prices change again and the profitability ends.
to take advantage of market inefficiencies making a profit regardless of the overall market trend
Like any trading strategy, crypto arbitrage is not risk-free. It can involve several risks, such as
regulatory risks that can affect the entire market
liquidity risks that depend on the trading volume of the chosen exchanges
volatility risks due to the intrinsic nature of cryptocurrencies
hack risks because exchanges could be hacked, go offline, or experience other issues that can impact the value of assets held on them.
There are four types of arbitrage:
The last one is the most common, which can be used both on CEXs and DEXs.
Overall, crypto arbitrage can be a profitable strategy for traders who can identify and take advantage of price differences in different markets. However, traders must be aware of the risks before engaging in arbitrage.