Arbitrage: why price gaps close so fast
Arbitrage is buying an asset cheap in one place and selling it dearer in another for a near risk-free profit. In theory, free money. In practice, one of the most competitive games in markets.
The main flavours
- Cross-exchange. Same coin cheaper on exchange A than B, buy A, sell B.
- Triangular. Exploit a pricing inconsistency across three pairs on one venue (e.g. BTC→ETH→USDT→BTC).
- DEX / on-chain. Gaps between decentralized pools, often captured with flash loans in a single transaction.
Why the edge vanishes
Gaps exist for seconds because bots with co-located servers and low fees pounce instantly. By the time a human sees it, it's gone. What looks like a 1% gap is usually eaten by:
- Fees on both legs, plus withdrawal costs.
- Latency & slippage, the price moves while you execute.
- Transfer time, moving funds between venues isn't instant; the gap closes meanwhile.
Reality check. Profitable arbitrage today is an engineering problem, speed, fees and infrastructure, not a spot-the-gap game. For most people it's a lesson in why prices stay consistent, not a strategy.
Educational market information, not financial advice. Markets carry risk of loss, do your own research.