The Basic Idea (And Why It's Misleading)
Crypto arbitrage = same token, different price on two exchanges. Buy low, sell high. The price gap is called the spread.
The spread between the best quotes shows the initial price difference. For the chosen token quantity, estimate average buy and sell prices and then account for all costs.
For a chosen token quantity, the initial quotes imply a $100 purchase and a $104.40 sale. Assume the following dollar costs:
$4.40 − $5.70 = −$1.30. Costs are illustrative assumptions, not exchange tariffs. Slippage is measured against the initial quotes for the same token quantity.
Five Ways to Arbitrage Crypto
The illustrative quotes below refer to the same underlying asset. Spread = (sell price − buy price) / buy price × 100%, before costs. For futures trades, the result also depends on the spread when both positions are closed.
Buy a token on Exchange A spot and sell it on Exchange B spot.
💡 Illustrative prices: buy at $10.00, sell at $10.20. Spread: 2.00%.
⏱ Inventory can be placed in advance. Transfers and rebalancing still take time and incur costs.
Buy spot and open a short perpetual position on the same asset.
💡 Illustrative prices: spot at $10.00, futures short at $10.30. Entry spread: 3.00%.
Both venues need capital, and both positions need an exit plan.
Open a futures long on Exchange A and a short in a comparable contract on Exchange B.
💡 Illustrative prices: long at $10.00, short at $10.10. Entry spread: 1.00%.
⚠️ Each position has its own margin requirements and funding schedule.
Buy a token in a DEX spot pool and sell it on a CEX, or reverse the route.
💡 Illustrative prices: buy on a DEX at $9.80, sell on a CEX at $10.00. Spread: about 2.04%.
🔗 Account for gas, price impact and transfer availability.
Buy the spot token on a DEX and open a futures short on the same asset.
💡 Illustrative prices: DEX spot at $10.00, futures short at $10.20. Entry spread: 2.00%.
Verify the token matches the contract, both executions and the margin requirements.
What Affects the Net Result
Slippage is the difference between a reference quote and the actual average execution price. Trade size, order book depth and changing quotes affect it.
Use the maker/taker fees for your account and each market. A futures pair needs fees for opening and closing both positions.
If the route requires a transfer, check deposits and withdrawals for the exact token on a compatible network, including limits and confirmations.
An exchange withdrawal fee can differ from the network fee. Check the current amount received and costs for the entire route, including rebalancing.
At a positive rate, longs pay shorts; at a negative rate, shorts pay longs. Each position needs its own notional value, rate and settlement time.
Leverage and Separate Margin for Each Position
⚡ Each exchange evaluates the collateral for its own position.
Consider an illustrative linear position with $1,000 of initial margin. A 5% adverse price move would produce the following price loss before fees and funding:
Profit on a short at Exchange B is not automatically transferred to the long account at Exchange A. One side can be liquidated while the other remains open.
A basic initial-margin estimate is notional / leverage. It does not determine the liquidation price. Check mark price, maintenance margin, fees, funding and margin mode; no leverage level is universally safe.
Funding Arbitrage: Calculating Cash Flows
Funding is a payment between holders of a perpetual contract according to its schedule. The strategy seeks to receive those payments while hedging the same asset. Compare both position sizes, settlement intervals and the intended holding period.
Assume a linear futures short and a spot purchase of the same token quantity. If the short notional is $1,000 at every settlement and the rate stays at +0.15% per 8 hours, the short receives $1.50 per settlement, or $4.50 over three settlements. This is funding before fees and changes in the spread.
Fair Price: Spotting Market Anomalies
The median of current, comparable quotes can serve as a price reference. First verify that the data represents the same asset, compatible markets and similar timestamps.
Illustrative example: with a $1.00 median, a $1.20 quote is 20% above the reference. This calls for checking the market and data quality.
Check quote freshness, token identity and available depth. The deviation alone does not establish that a trade is executable.
Compare available execution prices and full costs for your size. A median does not replace the order book price.
How to Evaluate a Trade
Check the inputs, execution and exit conditions for each side.
Choose comparable markets. A positive quoted spread requires further checks.
Verify the token, network, contract type and transfer status. Compare liquidity across the available routes.
Review available order book depth, spread history, data timestamps and estimated costs.
Recalculate average execution prices for the chosen quantity. Include exit costs, trading fees, funding and transfers.
Check margin reserves and the response if only one side fills. Estimate the result with worse prices and costs.
Mistakes That Cost Real Money
The illustrative 4.4% spread above produced a −$1.30 result after the assumed costs.
Execution price changes with trade size and the state of the order book.
A price move can liquidate one side of the hedge.
Withdrawals for the required token or network may be suspended.
The available price may have changed since the quote was received.
At a negative rate, a long receives and a short pays. Both the sign and interval matter.
An incompatible network blocks the route; fees and withdrawal minimums change the calculation.
A large deviation can reflect a data error or a lack of liquidity.
Separate margin, incomplete execution and diverging prices leave residual risk.
Is Crypto Arbitrage Still Profitable in 2026?
An opportunity must be assessed using executable prices and full costs. A positive quote difference alone does not establish a profitable trade. The illustrative examples in this article explain the calculation rather than establish strategy returns.
Compare available markets, token identity and depth. A large price gap may coincide with transfer restrictions.
Compare the executable pool price with the order book, including gas, block delay and transfers.
Compare rates over a common period. Calculate payments on both positions and the costs of opening and closing.
Verify token equivalence and bridge availability. Bridge costs and completion time belong in the route calculation.
Before execution, costs and scenarios can be estimated, but the actual result depends on fills. Record input quotes and timestamps, then compare the estimate with actual order fills and payments.
Checking a trade means pricing your size, accounting for the full cycle of costs and confirming that both sides can be closed.