How Does the Volatility of Cryptocurrencies Create Unique Arbitrage Opportunities Compared to Traditional Assets?

Cryptocurrency volatility leads to frequent and significant price discrepancies across numerous, often globally distributed and less-interconnected exchanges. This fragmentation, combined with rapid price swings, creates arbitrage opportunities that are larger and more common than in traditional markets.

Traders can exploit these gaps by buying a cryptocurrency on an exchange where it is cheaper and selling it on another where it is more expensive. The speed of these changes, however, also increases the risk of the price moving against the trader before the arbitrage can be completed.