Arbitrage Opportunities in Crypto: Spot, Futures, Cross-Exchange
Crypto offers more visible arbitrage than mature asset classes. Understanding why it persists is more valuable than the list of trades, because the reason is also the barrier.
The main forms
Cross-exchange. The same asset at different prices on different venues. Buy the cheap, sell the dear.
Cash and carry. Long spot, short future, capturing the basis. In crypto this is usually the funding rate on perpetuals, and it has been the largest and most durable of these trades.
Triangular. Inconsistent cross rates between three assets, the same relationship that must hold in FX.
CEX-DEX. Prices diverge between centralised and decentralised venues, because on-chain trading is slower and more expensive.
Why the gaps persist
Not because nobody has noticed. Four structural reasons, all operational.
Capital cannot move quickly. Settlement takes minutes, so capital must be pre-positioned on every venue. That is expensive and it is the primary constraint.
Counterparty risk is real. Inventory sitting on an exchange is an unsecured claim on it. That is a genuine cost of running the strategy, and several firms have discovered it the hard way.
Fragmentation is extreme. Dozens of venues, no consolidated tape, no best-execution requirement.
Operations are hard. Multiple venues means multiple APIs, key management, withdrawal limits and reconciliation.
Crypto arbitrage is a capital and operations business, not an insight business. The prices are visible to everyone; the constraint is having inventory in the right place with acceptable counterparty exposure.
What it costs to capture
Before treating a spread as profit, subtract:
- Trading fees on both legs, which vary by venue and tier.
- Withdrawal and network fees when rebalancing.
- The opportunity cost of capital idle across many venues.
- Execution risk between the two legs.
- Counterparty risk on every balance held.
Once those are counted, many visible spreads are not opportunities. That is exactly why they remain visible.
Where the durable business is
Market making rather than pure arbitrage. Providing continuous liquidity across fragmented venues earns spread consistently, and the arbitrage falls out of the inventory management.
Basis and funding. Larger and more persistent than in traditional markets, and scalable.
Facilitating institutional flow. Large buyers need someone to source liquidity across venues, which is a service business.
The pure latency race exists in crypto as it does elsewhere, and it is capital-intensive and competitive.
"You see BTC 0.5% cheaper on exchange A." The expected answer walks through the costs: fees both sides, whether you already hold inventory on both venues, withdrawal time if not, and your counterparty comfort with A. Saying "buy A, sell B" without that is the wrong answer.