How Do Transaction Fees (Gas Costs) Affect the Profitability of These Arbitrage Opportunities?

Gas costs are a direct expense that reduces the net profit of any decentralized finance (DeFi) arbitrage trade. For smaller price discrepancies, high gas fees can entirely wipe out the potential profit, turning a positive expected value trade into a negative one.

Arbitrageurs must factor in the current network congestion and gas price when calculating the trade's viability. The fee is paid regardless of whether the transaction succeeds or fails, adding risk.

Fast, successful execution is critical to minimize the impact of fluctuating gas prices.