How Does the Cost of Execution Impact the Viability of an Arbitrage Opportunity?

Execution costs, including trading fees, slippage, and withdrawal fees, directly reduce the profit margin of an arbitrage trade. An arbitrage opportunity is only viable if the price discrepancy exceeds the total cost of execution.

High costs can eliminate small price differences, meaning they are not true arbitrage. Arbitrageurs seek low-fee venues and minimize latency to keep costs low.

High transaction costs can protect small inefficiencies.