Arbitrage in crypto is the practice of exploiting price differences for the same asset across different markets, exchanges, or blockchains – buying where it is cheap and simultaneously selling where it is more expensive, profiting from the spread. Arbitrage is a fundamental market mechanism that keeps prices aligned across trading venues. Types of crypto arbitrage include: Simple arbitrage (ETH at $3,000 on Coinbase, $3,005 on Binance – buy on Coinbase, sell on Binance); Triangular arbitrage (exploit pricing inconsistencies between three trading pairs on the same exchange); DEX-CEX arbitrage (a DEX price lags a CEX – bots trade between them until aligned); and Cross-chain arbitrage (same token priced differently on Ethereum vs Solana). Arbitrage opportunities are fleeting – algorithmic bots detect and eliminate them within milliseconds. Successful arbitrage requires speed (automated bots), low fees (gas costs must be lower than the price differential), and capital (larger positions amplify small percentage differences). MEV arbitrage is a major category – bots monitoring mempools execute arbitrage through block ordering. Flash loan arbitrage enables zero-capital arbitrage using borrowed funds repaid within a single transaction.
Example: Example: ETH/USDC trades at $3,000 on Uniswap and $3,010 on Coinbase. An arbitrage bot buys ETH on Uniswap and sells at $3,010 on Coinbase – $10 profit per ETH. At 100 ETH, that is $1,000 profit. The bot repeats until the price gap closes. This is why ETH prices are consistent across all exchanges within seconds of any significant move.
Learn more: Ethereum.org – MEV & Arbitrage
