What Is Arbitrage?
Arbitrage is the simultaneous purchase and sale of the same asset in different markets to profit from a price discrepancy. In crypto, this can mean buying BTC on Exchange A at $65,000 and selling on Exchange B at $65,100, capturing the $100 difference (minus fees).
How Arbitrage Works
Common crypto arbitrage types:
- Cross-exchange — Price differences between centralized exchanges
- Triangular — Price inconsistencies between three trading pairs on the same exchange
- DeFi arbitrage — Price differences between AMM pools or DEXs
- Basis/Funding — Spot vs futures price differences
- Cross-chain — Price differences of the same token on different blockchains
Why It Matters for Traders
Arbitrage opportunities in crypto have compressed over time as the market matures, but they still exist — especially during high volatility and across DeFi protocols. More importantly, arbitrageurs serve as the market's price alignment mechanism. Understanding arbitrage dynamics explains why prices converge across venues and why funding rates oscillate around equilibrium.
