Cryptocurrency arbitrage is a method of making a profit from price differences.

Crypto arbitrage is a trading strategy that has existed as long as financial markets have. The essence of the method is to buy and sell the same asset simultaneously on different platforms to profit from price discrepancies. In the cryptocurrency market, this strategy has become particularly popular because arbitrage is an accessible tool even for beginner traders, allowing them to earn from natural market fluctuations without needing to predict price directions.

In modern crypto trading, traders actively use several types of arbitrage, each based on different market mechanisms and offering unique earning opportunities.

What is cryptocurrency arbitrage and how does it work in practice

At first glance, the concept seems simple: find a price difference, immediately exploit it, and make a profit. However, in practice, arbitrage requires understanding several key market mechanisms that must be considered when planning trades.

Arbitrage is especially relevant on modern decentralized and centralized exchanges, where each platform may offer different prices for the same asset. This occurs due to differences in liquidity, the number of traders, and the speed of order execution on each specific platform.

Classic conditions for arbitrage application:

• There is a visible price difference between two markets
• The difference is sufficient to cover fees and slippage
• The trader can place orders in opposite directions simultaneously
• There are necessary funds or margin to open positions on both levels

Two main types of arbitrage strategies in cryptocurrency trading

Funding-based arbitrage: earning passive income

The first type involves simultaneously placing orders on spot (physical market) and perpetual contracts to earn from funding rates.

Positive funding — when long position holders pay fees to short position holders. In this scenario, the trader buys the asset on the spot market and opens a short position on a perpetual contract of equal volume. This hedges against price fluctuations while earning funding income.

Example: The BTCUSDT perpetual contract has a positive funding rate of +0.01%. The trader buys 1 BTC on the spot for $30,000 and opens a short position on 1 BTC in the perpetual. Regardless of whether the price rises or falls, their portfolio remains hedged, and they regularly receive funding from long traders.

Negative funding — the opposite scenario, where short traders pay longs. Here, the trader opens a short on the spot and a long on the perpetual, earning funding similarly.

Spread arbitrage: exploiting price discrepancies

The second approach focuses on instant profit from the difference between the spot market price and the futures or perpetual contract price.

For example, if BTC is priced at $29,950 on the spot market and the BTCUSDT perpetual contract is at $30,100, the spread is $150. The trader can buy BTC on the spot and simultaneously sell the contract, locking in this difference. When the contract expires or prices converge, the trader profits from the spread minus fees.

Features and capabilities of modern arbitrage on platforms

Modern exchanges provide specialized tools for convenient arbitrage strategies. These solutions greatly simplify the process of monitoring opportunities and placing orders.

Real-time opportunity scanning — the system automatically tracks all trading pairs and identifies those where the spread or funding is large enough for profitable trading. Ranking by funding rates shows which pairs currently offer the highest passive income, while ranking by spreads shows the maximum price differences.

Simultaneous order placement — instead of manually placing orders on different markets, the trader can place both orders with one click. The system automatically determines the opposite direction once the first is selected.

Intelligent rebalancing system — an innovative feature that addresses one of arbitrage’s main issues: partial order execution. If one order is fully executed and the other only partially, imbalance and risk arise. The system checks the balance every 2 seconds and automatically places market orders to equalize positions. Each rebalancing cycle is valid for 24 hours, after which unfilled orders are canceled.

Wide collateral options — modern unified trading accounts allow using over 80 different crypto assets as collateral for arbitrage trading. This means a trader can hold, for example, ETH as margin and simultaneously place orders on BTC pairs.

Available trading pairs:

• Spot (USDT) with USDT perpetual contract
• Spot (USDC) with USDC perpetual contract
• Spot (USDC) with USDC futures contract

Step-by-step guide to placing arbitrage orders

How to place an order in the mobile app

Step 1: Select the instrument
Go to the trading page, find the instruments section, and choose the arbitrage option.

Step 2: Analyze opportunities
Review available trading pairs sorted by funding size or spread. Select the pair offering sufficient profit potential.

Step 3: Configure the order

• Decide on direction: buy or sell. The system will automatically set the opposite for the second part.
• Choose order type: market for quick execution or limit to control price.
• Specify volume (the same for both directions). Filling one field automatically fills the other.
• Enable rebalancing (recommended by default).

Step 4: Confirm
Press the place order button and confirm. Both parts should be sent simultaneously.

Step 5: Monitor
After placing, track the order status in the active orders section. Once executed, you can view history in the journal.

Step 6: Manage positions
After execution, actively manage open positions:

• Review positions on perpetual and futures contracts on the derivatives page
• Check spot assets in the portfolio section
• Track funding income in your unified account’s transaction log

Key risks and limitations of arbitrage trading

Despite its apparent attractiveness, traders must be aware of potential dangers.

Partial execution and liquidation — if one order is executed and the other isn’t, a portfolio imbalance and liquidation risk may occur. That’s why it’s critical to enable the smart rebalancing feature.

Price slippage during rebalancing — automatic placement of market orders during rebalancing may occur at a price different from expectations, reducing final profit.

No profit guarantees — arbitrage is a tool with inherent risks. Exchange fees and slippage can negate earnings.

Liquidity constraints — if the market is illiquid, desired prices may be unavailable or executed with high slippage.

Traders are fully responsible for managing their positions and should not rely on the platform to close positions or protect against losses.

Frequently asked questions about arbitrage

When is the best time to place arbitrage orders?
Arbitrage is most effective when:

• There is a visible spread between spot and derivatives sufficient to cover all costs
• Working with large volumes where margin profit from spread or funding is significant
• When quick execution of a complex, synchronized strategy on two markets is needed
• When closing multiple positions simultaneously without losses from timing discrepancies

How to accurately calculate potential profit?
Spread = Selling price of the ticker − Buying price of the ticker
Spread percentage = (Selling price − Buying price) / Selling price × 100%
For funding:
APR = (Total funding rate over 3 days / 3) × (365 / 2)
Total funding rate = sum of all rates over the last 72 hours

Can arbitrage be used to close existing positions?
Yes, the system allows opening and closing positions via the arbitrage tool, leveraging its synchronized execution.

Does arbitrage work on sub-accounts?
This feature is only available if the sub-account has the status of a unified trading account (ETA).

Why did the order remain unfilled?
Common reasons include:

• Insufficient available margin to execute both parts
• Lack of liquidity on one of the markets
• Poor trading pairs or absence of counterparties

What happens if rebalancing is disabled?
Without rebalancing, the system will not automatically adjust volumes. Orders will execute independently, and the trader bears full responsibility for position balance.

Why does rebalancing stop after 24 hours?
This is normal system behavior. Each rebalancing cycle is limited to 24 hours to prevent funds from being stuck in unfilled orders. After this period, unfilled orders are automatically canceled.

Where to view positions after full execution?
Once both parts are fully executed, the strategy concludes:

• Spot assets are visible in the spot portfolio section
• Contract positions are shown on the derivatives positions page
• Funding income can be checked in the transaction log of your unified account

Why do orders remain unbalanced during active rebalancing?
Reasons include:

• Maintenance margin has fallen below the required level
• Insufficient liquidity on the market for the needed volumes
• One order is too aggressive and cannot find counterparties

Will manual order cancellations affect the arbitrage strategy?
It depends on the rebalancing status:

• If rebalancing is active: canceling one order will automatically cancel its pair and stop the strategy
• If rebalancing is disabled: orders operate independently, and canceling one does not affect the other

Crypto traders can leverage arbitrage as a powerful profit tool, but success depends on understanding the mechanics, careful risk management, and continuous market monitoring.