The idea in one sentence
Arbitrage means buying an asset where it is cheap and selling it where it is expensive, keeping the difference. The idea is ancient — money changers at medieval fairs did it, currency dealers do it, and crypto traders do the same. Only the speed changed, and the fact that there are now hundreds of "fairs" open around the clock.
Why prices differ at all
Every exchange runs its own isolated order book. Its price is made purely of what its own users are willing to buy and sell right now. Nothing forces Binance and MEXC to show the same number — the only thing connecting them is traders noticing the gap and closing it.
Gaps appear and persist for several reasons:
- Different liquidity. A large exchange has a dense book; on a small one a single trade moves the price by percent.
- Local demand. This is most visible on P2P: where hard currency is scarce, people pay a premium for a dollar in USDT; where it is freely available, there is no premium.
- Reaction speed. After sharp news, exchanges do not reprice simultaneously, and a gap opens for a minute or two.
- Barriers. If a coin cannot be moved quickly between venues, the difference can sit there for hours simply because nobody can close it.
The main types
Cross-exchange spot. The classic: buy a coin on one exchange, transfer it, sell it on another. The enemies are transfer time and network fees — the spread can vanish while your transaction confirms.
P2P arbitrage. Working with fiat: buy USDT from a merchant on one marketplace and sell it on another at a higher rate. Moving stablecoins between venues is instant and nearly free, but bank limits, payment time and the risk of a frozen card enter the picture.
Funding arbitrage. Not about price gaps but about the payment exchanged between holders of perpetual futures positions. The position is built so market direction does not matter and the funding rate provides the return.
Triangular arbitrage. A mismatch inside one exchange across three pairs, say BTC/USDT, ETH/BTC and ETH/USDT. No transfers needed, but the gaps are tiny and last seconds — bot territory.
What the real result is made of
The percentage on screen is the gross difference. What reaches your wallet is whatever survives the costs:
- Trading fees — 0.02% to 0.2% per side, so up to 0.4% for the round trip.
- Network fees when moving coins. USDT on TRON costs cents; the same coin on Ethereum can cost several dollars.
- Slippage. If your size exceeds the best order, part of it fills at a worse price.
- Time. While the transfer confirms, the price carries on moving.
Hence the practical rule: a spread below one percent is almost always eaten by costs, and only makes sense with very cheap transfers and large size.
Risks the ads do not mention
The most common way to lose money in arbitrage is getting stuck holding the coin. You bought it cheap, sent it to the second exchange, and there withdrawals are paused or the deposit does not credit. The spread closed long ago and you still hold the asset.
Second most common is the illusion of size. An attractive price often sits on an order or offer where only pocket change is available. That is exactly why we show limits and available size next to every price: without them the percentage tells you nothing.
Third is regulatory and banking friction. On P2P that means a card frozen over suspicious transfers; on exchanges, a verification request arriving precisely when you need to withdraw urgently.
Where to start
Start by watching. Open the relevant tool and simply observe for a week: which routes appear, how long they survive and how big they are. Then run the route through the calculator with your real fees. Only then try it with an amount you would be comfortable losing.