How Do Transaction (Gas) Fees on a Blockchain Impact the Feasibility of DEX Arbitrage Strategies?

Gas fees are a direct cost that must be overcome for a DEX arbitrage to be profitable. Because arbitrage opportunities on DEXs can be very small, a high gas fee can easily make the trade unprofitable.

During times of network congestion, gas fees can spike, rendering most arbitrage opportunities useless. This creates a competitive environment where only arbitrage trades with a high enough profit margin to cover the unpredictable gas costs are viable.

It also favors arbitrageurs who are sophisticated enough to optimize their gas usage.