Crypto Arbitrage Across Exchanges: Execution, Costs, and Risks
Summary
The document explains cross-exchange crypto arbitrage: buying an asset where its price is lower and selling where it is higher, while accounting for whether the spread survives execution. It illustrates the idea with a Bitcoin price difference across two venues and identifies differences in liquidity, trading volume, and sentiment as possible sources of price discrepancies. It also describes cash-and-carry trades, which pair spot and futures positions to exploit a basis difference.
The guide emphasizes assessing trading, withdrawal, and network costs, along with execution time, liquidity, and volatility. It notes that bots and exchange APIs can scan markets and automate orders, and recommends real-time data, filters, and backtesting tools. Opportunities may disappear quickly, and fees, technical failures, regulation, and limited liquidity can undermine apparent gains. The document provides no systematic performance evidence or detailed net-profit calculation; its example does not establish that the spread is achievable after costs or transfer constraints.
Key ideas
- Cross-exchange arbitrage buys an asset on one venue and sells it on another to capture a price difference.
- Cash-and-carry arbitrage pairs spot and futures positions to target a pricing difference between those markets.
- Trade evaluation should account for fees, liquidity, execution time, and the risk that a spread closes before both legs fill.
- Bots and exchange APIs can automate opportunity scanning and order execution, but they do not guarantee profits.
- Backtesting can help assess a strategy, though the document gives no measured results or complete profit calculation.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.