How Do Arbitrageurs Exploit Price Discrepancies in the Cryptocurrency Market?
Crypto arbitrageurs buy a cryptocurrency on one exchange where the price is lower and simultaneously sell it on another exchange where the price is higher. This is often inter-exchange or triangular arbitrage.
They rely on speed and automated trading systems to execute the trades before the price difference vanishes. Volatility and fragmented markets in crypto create these opportunities.
Transaction fees and withdrawal times must be factored in.
Glossar
Arbitrageurs
Action ⎊ Arbitrageurs, operating within cryptocurrency derivatives markets, represent a specialized class of traders exploiting fleeting price discrepancies across exchanges or instrument types.
Automated Trading Systems
Algorithm ⎊ Automated trading systems, within cryptocurrency, options, and derivatives, leverage pre-programmed instructions to execute trades based on defined parameters, minimizing discretionary intervention.
Exploit Price Discrepancies
Arbitrage ⎊ To exploit price discrepancies involves executing trades to profit from temporary differences in the price of the same asset across different markets or exchanges.
Triangular Arbitrage
Arbitrage ⎊ Triangular arbitrage, within the context of cryptocurrency derivatives and financial markets, exploits temporary price discrepancies across three distinct markets or exchanges for the same underlying asset or related instruments.