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What Is Crypto Arbitrage Trading?

Crypto arbitrage trading is a way to profit from price differences in a cryptocurrency trading pair across different markets or platforms.
Crypto arbitrage trading involves making money from price differences of cryptocurrencies between different exchanges.


Imagine that BTC/USD is trading at $30,000/30,100 on Coinbase and at $30,200/$30,300 on Crypto.com. An arbitrage trader could quickly buy 1 BTC on the Coinbase exchange for $30,100 and simultaneously sell it on Crypto.com for $31,200, making a profit of $100.

The common way prices are discovered on most exchanges is through an order book, which lists buy and sell orders for a specific crypto asset. Depending on the exchange, buyers and sellers might bid different prices, resulting in mismatched prevailing prices across exchanges.

An arbitrage opportunity arises when a significant price difference is detected for a specific cryptocurrency. You can then calculate the potential profit by considering trading fees and other associated costs. The last step in the process is to buy the cryptocurrency on the exchange where the price is lower and simultaneously sell on the exchange where the price is higher. In most cases, trading bots take care of this trading approach as they can determine arbitrate opportunities faster and execute trades quicker.