How Does Arbitrage Contribute to Market Efficiency? ⎊ Path

How Does Arbitrage Contribute to Market Efficiency?

Arbitrage contributes to market efficiency by exploiting and eliminating price discrepancies between related markets, such as the perpetual futures and the spot market. By trading to close the gap, arbitrageurs ensure that the law of one price holds, keeping the perpetual contract price aligned with the underlying spot price.

This reduces market fragmentation and provides a fairer price for all traders.

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