Arbitrage

Share on social media

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.

Did you find this term clearly defined?

Yes

Explore Other Crypto Terms

APY

APY, or Annual Percentage Yield, refers to the annual rate of return that an investor can expect to earn from staking, lending, or yield farming with their digital assets.

Altcoin

An 'altcoin' is a blanket term used to denote any digital cryptocurrency that is not Bitcoin, which was the first established cryptocurrency.

Airdrop

An 'airdrop' refers to a method in which free tokens or coins are distributed to the holders of a particular cryptocurrency. This is typically done as a strategy to promote a new cryptocurrency or to reward loyal users of a blockchain network.

ATH

In the realm of finance and particularly in cryptocurrency markets, 'ATH' is an acronym standing for 'All-Time High.' It refers to the highest value or price that a particular asset, such as a stock or a cryptocurrency, has ever reached in its entire trading history.

ATL

In financial and particularly cryptocurrency contexts, 'ATL' is an acronym for 'All-Time Low.' It refers to the lowest price point that a specific asset, such as a stock or a cryptocurrency, has ever achieved throughout its entire trading history.

Atomic Swaps

An Atomic Swap, also known as a cross-chain trade or atomic cross-chain trading, is a technology that allows for direct peer-to-peer trading across different blockchain networks.