What Is the Necessary Condition for an Arbitrageur to Trade against an AMM Pool? ▴ Learn

What Is the Necessary Condition for an Arbitrageur to Trade against an AMM Pool?

The necessary condition is a price discrepancy between the AMM pool's calculated price and the price on an external market, such as a centralized exchange. When the AMM's price is lower than the external price, an arbitrageur buys from the AMM and sells externally for a risk-free profit.

This action is crucial as it corrects the AMM's price, ensuring it stays aligned with the broader market.

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