How Does ‘Withdrawal Lock-up’ Affect the Execution of Cross-Exchange Arbitrage?

A withdrawal lock-up is a period during which an exchange temporarily holds a user's deposited funds before allowing them to be withdrawn. This delay is a significant problem for cross-exchange arbitrage because the funds needed for the second leg of the trade are inaccessible.

The price discrepancy may vanish or reverse during the lock-up period, turning a potential profit into a loss or a stranded asset. Arbitrageurs must use pre-funded accounts.