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What does Arbitrage mean in crypto terms?

Arbitrage refers to the practice of taking advantage of price discrepancies across different crypto exchanges. This occurs when a cryptocurrency is being sold for different prices on separate platforms. For instance, Bitcoin could be bought for a lower price on Exchange A, and then sold for a higher price on Exchange B, generating a profit from the difference.

Arbitrage opportunities arise due to factors such as liquidity variations, transaction volumes, geographical location, and minor differences in supply and demand across various exchanges. Crypto arbitrage can be performed manually, though it's often conducted through automated trading bots due to the speed and efficiency required to take advantage of fleeting price disparities.

While crypto arbitrage can offer lucrative profit margins, it also carries inherent risks. These include exchange rate risks, transaction delays, exchange platform stability, withdrawal fees, and the risk of one's funds being held on an exchange that becomes insolvent or suffers a security breach. As such, while the concept of arbitrage is straightforward, successful execution requires a deep understanding of the crypto market and careful risk management.

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