Arbitrage

Arbitrage is the practice of profiting from a price difference for the same or equivalent asset across different markets or forms, by buying where it is cheaper and selling where it is dearer. In crypto, this can mean exploiting price gaps between exchanges, or between a spot market and a derivative.

Arbitrage activity tends to push prices back into alignment, because the buying and selling pressure narrows the gap—so it helps keep markets consistent and, for automated market makers, tethered to outside prices. A common misconception is that arbitrage is risk-free; execution delays, fees, and transfer times can erode or eliminate the expected difference.