Arbitrage
Crypto arbitrage basics: why spreads appear
Crypto arbitrage is the practice of comparing prices for the same or similar asset across different venues. A simple example is when Bitcoin trades slightly higher on one exchange than another. At first glance, this can look like an opportunity.
In reality, the visible price difference is only a starting point. Exchanges have separate order books, different users, different liquidity conditions, and different fee schedules. A price gap can exist because one venue is moving faster, because liquidity is thin, or because deposits and withdrawals are temporarily restricted.
A serious arbitrage analysis checks more than the headline spread. It considers trading fees, withdrawal fees, order book depth, latency, transfer time, minimum trade size, and the possibility that the spread disappears before the trade is completed.
The best way to study arbitrage is to treat every signal as a hypothesis. A signal should be tested against real execution conditions before it is considered meaningful.