Exchange and inter-exchange arbitrage: risks and opportunities.

Published: 7 мая 2023
4 min

Exchange and inter-exchange arbitrage: risks and opportunities. Exchange and inter-exchange arbitrage: risks and opportunities.

What is cryptocurrency arbitrage

Cryptocurrency arbitrage is the process of buying and selling cryptocurrencies on different exchanges in order to profit from the difference in prices of the same cryptocurrency. This is possible due to different prices of cryptocurrency on exchanges in real time.

When the price of a particular cryptocurrency on one exchange is higher than on another, the arbitrator can buy the cryptocurrency on an exchange with a lower price and sell it on an exchange with a higher price, earning on the price difference. This process can be automated with specialized programs that allow arbitrageurs to react quickly to changes in prices.

What is the difference between intra- and inter-exchange cryptocurrency arbitrage

Intra-exchange arbitrage is possible if, cryptocurrency X is available for trading in X/BTC and X/ETH pairs and the price of X/BTC is higher than the price of X/ETH. The arbitrator can buy X in the X/ETH pair and then sell it in the X/BTC pair in order to profit from the price difference.

Inter-exchange arbitrage takes place between different exchanges. You can buy cryptocurrency Y for 1 ETH and then transfer it through the blockchain network to another exchange and sell it there for 1.3 ETH, paying a transaction fee of 0.1ETH. The profit, including costs, would be 0.1 ETH.

Inter-exchange arbitrage is more complicated and risky because it requires transferring cryptocurrency between different exchanges and may be subject to delays and higher exchange fees. However, there are much more earning opportunities, as price differences for the same cryptocurrency on different exchanges can be greater than on the same exchange

What risks does cryptocurrency arbitrage carry

Cryptocurrency arbitrage carries certain risks associated with cryptocurrency price fluctuations. The following are some of the main risks in cryptocurrency arbitrage:

  1. market risk: if the price of a cryptocurrency that you bought falls sharply, it could lead to a loss of profit or even a loss;
  2. liquidity risk: not all exchanges have enough trading volume to allow you to make arbitrage transactions quickly. Then you will not be able to sell or buy enough cryptocurrency at the desired price;
  3. technical risk: when using arbitrage bots, technical failures or errors can lead to erroneous trades and loss of profits;
  4. security risk: arbitrageurs managing large amounts of money can become victims of hacking attacks. To reduce the risk, it is necessary to use reliable exchanges and wallets, as well as to take security measures, such as two-factor authentication and the use of complex passwords;
  5. Risk of errors in calculations: When calculating the potential profit from cryptocurrency arbitrage, there may be an error in calculations due to changes in transaction fees or confirmation times.

What advantages cryptocurrency arbitrage has over other trading strategies

With all the risks, cryptocurrency arbitrage has advantages over other trading strategies:

  1. low risks: arbitrage allows you to make a profit using the difference in prices, the profit is derived not from price movements, but from the difference in prices between different exchanges;
  2. Fast execution of transactions: Automated trading bots, instantly execute transactions, which is important to profit from fast-changing cryptocurrency prices;
  3. Independence from market direction: profit can be gained regardless of where the market is going, no margin trading will be used;
  4. scalability: traders can earn more profits using larger amounts and larger volume of trading operations;
  5. portfolio diversification: Cryptocurrency arbitrage allows to distribute risks and make profit from different sources.


If you have decided to engage in stock exchange arbitrage, it is important to be prepared for the fact that it is not an easy and quick way to earn money. It requires serious work and analysis of the market, as well as readiness for risks. Before you start trading, it is recommended to study the market thoroughly and pass training.

In addition, you should not forget that there are other trading strategies in the cryptocurrency market, such as long-term investments, trading based on the analysis of technical indicators and fundamental analysis, which can also bring profit. It is important to choose the strategy that suits you best.

In general, exchange arbitrage and interchange arbitrage are complex and risky strategies for trading on cryptocurrency exchanges. If you are ready for serious work and market analysis, these strategies can bring good profits. It is important to remember that success in cryptocurrency trading depends on many factors, including market knowledge, experience, patience, and the ability to make decisions in difficult situations.

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