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What is arbitrage trading in crypto? Definition, operation, and risks

Arbitrage Trading in Crypto
  1. The arbitrage concept in crypto trading
  2. Example of an arbitrage opportunity with Bitcoin
  3. Risks of arbitrage opportunities in crypto trading
  4. Conclusion on arbitrage in crypto trading

The arbitrage concept in crypto trading

Example of an arbitrage opportunity with Bitcoin

Risks of arbitrage opportunities in crypto trading

  • Be mindful of the exchange and deposit fees of the different blockchains and cryptocurrency exchange platforms when calculating the potential benefit of an arbitrage, so as to always make profits from your transactions.
  • Check on CEX (centralized exchanges) that deposits and withdrawals are active; some withdrawals might be temporarily unavailable when a strong arbitrage opportunity arises.
  • Take slippage into account when buying and selling the asset in arbitrage.
  • Be reactive: most arbitrages are made by bots or traders that operate in timeframes of milliseconds.

Conclusion on arbitrage in crypto trading

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Siméon Ferez

MSc Computer Science Data Analytics, Engineering Student, and Crypto.