What is Arbitration?

Arbitrage is making money on price differences on different exchanges. For example, you see bitcoin for $9,000 on exchange X and $9,500 on exchange Y, so you buy bitcoin on exchange X and sell on exchange Y for a profit of $500. However, you have to be careful, because the rates quickly start to level out, so when the transfer of funds takes a longer period of time, the price may change. Another risk may be the use of exchanges that have low liquidity and then it is difficult to sell the whole thing or they will block your withdrawals.

Arbitrage is the buying and selling of assets to make a profit from the price difference between the markets. It is a trade that profits by taking advantage of the price differences of identical or similar financial instruments in different markets or on different platforms. Arbitrage exists as a result of market inefficiency, and therefore would not exist if all markets were perfectly efficient.

Arbitrage occurs when an investor is bought in one market and simultaneously sold in another market at a higher price and is therefore considered a risk-free return for the trader. With the advancement of technology, it has become extremely difficult to profit from price errors in the market. Many traders have computerized trading systems to monitor price fluctuations of similar financial instruments. Any inefficient pricing systems are typically quickly corrected and arbitrage opportunities are eliminated within seconds.