Arbitrage
Profiting from the same asset trading at different prices in two places by buying low and selling high.
Arbitrage exploits price gaps for the same asset across venues. If Bitcoin trades at $100,000 on one exchange and $100,200 on another, an arbitrageur buys on the first and sells on the second, pocketing the difference. The act of doing this pushes the two prices back together.
In practice the gaps are small and close in milliseconds, so the game belongs to bots with fast connections and capital on every venue. Fees, withdrawal times, and slippage can erase a thin edge. Cross-chain and DeFi arbitrage add bridge risk and gas costs to the math.
Related terms
The gap between the highest bid and the lowest ask, a basic measure of trading cost and liquidity.
LiquidityHow easily an asset can be bought or sold near its current price without moving that price much.
SlippageThe difference between the price you expected on a trade and the price it actually executed at.
Cross-ChainDescribes activity that spans two or more separate blockchains, such as moving assets or messages between them.