Crypto arbitrage

Crypto arbitrage is the simple idea of buying the same crypto asset where it is cheaper and selling it where it is dearer to capture the small spread between markets. It is a low‑risk strategy when executed with care because the profit comes from price inefficiencies rather than market direction. Centralized platforms set prices via order books, so the visible bids and asks move the quoted price in real time. Decentralized platforms use automated market makers, which price tokens according to pool balances, so a swap changes the ratio inside the pool and shifts that pool’s price independently of the wider market. Those two pricing worlds often disagree for a moment, and that gap is the arbitrage window. Traders hunt different forms of arbitrage, including simple one‑market to another trades, triangular paths that rotate value across three tokens to reveal a loop profit, and purely on‑chain decentralized arbitrage that hops between liquidity pools. Flash loans amplify these possibilities by lending capital inside a single atomic transaction without collateral, so a trader can capture a tiny spread at large scale as long as the whole operation repays itself instantly. Bots and smart contracts often race to spot and close these windows, which makes speed and low fees crucial. Risks exist even for disciplined arbitrageurs. Prices can move while transactions settle, block times can delay execution, and protocol oracles can behave strangely. Exchange withdrawals, deposit limits and platform checks can block flows and erase expected gains. Fees can swallow thin spreads, so understanding all costs is essential. Security and custody matter too because centralized services control keys and can halt access, while decentralized trading keeps users in control if they manage their private keys correctly. Hardware wallets and cold storage help protect keys from online attacks while letting users sign trades safely. Finally, smart contracts and flash loans introduce technical pitfalls and the potential for code exploits, so vigilance and auditing are important. In short, crypto arbitrage is about observing how different markets value the same asset, acting quickly to bridge those differences, and managing execution, fees and custody so that small edge turns into consistent profit rather than a costly lesson.