Arbitrage exploits temporary price differences for the same asset across markets. The core approach involves buying low on one exchange while simultaneously selling high on another. For crypto, focus on three types:
1. **Spatial arbitrage:** Capitalize on price gaps between exchanges (e.g., BTC at $60,500 on Binance vs. $60,700 on Kraken). Buy on Binance, sell on Kraken—pocketing the $200 spread minus fees.
2. **Triangular arbitrage:** Trade three currencies within one exchange (e.g., BTC → ETH → USDT → BTC) when implied rates misalign.
3. **Funding rate arbitrage:** Long spot + short perpetual futures when funding rates are highly positive, earning the rate differential.
**Critical requirements:** Ultra-fast execution (bots preferred), low fees, and monitoring withdrawal/deposit times. Risks include slippage, exchange delays, and sudden price convergence. Profits are often slim (0.1–0.5%), so scale matters. Always calculate net gains after gas/transaction costs.
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