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What is arbitrage?
Arbitrage is buying and selling the same or an equivalent asset at the same time in different markets to profit from a price difference between them. If a coin is cheaper on one exchange than another, an arbitrageur buys where it is cheap and sells where it is dear.
What it means for you
Apparent arbitrage profits often vanish once trading fees, withdrawal fees, transfer times and slippage are counted, and money in transit between platforms is exposed to price moves. The CFTC warns that scammers tout crypto-asset arbitrage algorithms, and that promised returns described as high or guaranteed are red flags of fraud.
How it works
The CFTC defines arbitrage as the simultaneous purchase and sale of identical or equivalent instruments across two or more markets to benefit from a discrepancy in their price relationship, and notes that in a theoretically efficient market there is no opportunity for profitable arbitrage. Gaps can also open between a futures contract and the spot price; the two tend to converge as delivery approaches. A related trade is the spread: buying in one market while selling the same commodity in another to take advantage of a price difference.
An example
Say a coin is $100 on one exchange and $101 on another. Buying 10 on the first and selling 10 on the second looks like $10 profit. With 0.2 percent fees on each side, about $4, plus a $5 withdrawal fee, about $1 is left, and that is gone if the price moves during the transfer.
Sources: CFTC Glossary, CFTC press release 8854-24: advisory on AI scams · checked 4 October 2026
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