Crypto Trading Through Arbitrage: A Strategy to Profit from Price Differences

Arbitrage in cryptocurrencies is not just a trading strategy but a method of extracting profit from market inefficiencies. The essence of this trading approach involves simultaneously buying and selling the same asset on different platforms or in different trading pairs to capitalize on price differences. There are several types of arbitrage approaches in the crypto market, each with its own features and opportunities.

The Essence of Arbitrage: Two Main Trading Strategies

Modern crypto arbitrage is divided into two main categories, attracting both experienced traders and beginners.

First approach: Playing on funding rates

This strategy is based on the mechanics of perpetual contracts. When the market is in an upward trend, traders with long positions pay funding fees to those holding short positions. This creates an ideal opportunity for arbitrage. Imagine a scenario: the funding rate for BTCUSDT is +0.01% per hour. Instead of just waiting, a trader can simultaneously buy Bitcoin on the spot market and open a short position on a perpetual contract for the same amount. The result: the purchase price increases with the market rise, the short position loses value by the same amount, but the trader earns funding fees each hour. This is called positive arbitrage.

The reverse scenario works similarly. When the funding rate is negative (shorts pay longs), one can open a short position on the spot market and a long position on the contract, earning from the negative fee.

Second approach: Profiting from price differences

This type of trading is based on the fact that identical assets often have different prices across markets. For example, the BTC price on the spot market may be lower than the price of a futures contract for the same currency. An experienced trader buys BTC on the spot and simultaneously sells a futures contract, locking in the difference. When the futures contract expires, prices converge, and the difference becomes profit. This method is called spread arbitrage.

Funding and Spreads: How These Arbitrage Tools Work

To facilitate traders using arbitrage strategies, specialized tools have been developed. They allow simultaneous monitoring of prices and liquidity on two related markets, then enable placing opposite orders with one click.

How to identify the best opportunities

The system ranks trading pairs in two ways. First, by the size of the funding rate — showing pairs where the funding fee is most attractive right now. This helps find the most promising opportunities for additional income. Second, by spreads — displaying pairs with the maximum price difference between spot and futures, ideal for spread strategies.

Smart balancing system

One key issue in arbitrage is uneven order execution. You place a buy and sell order for one BTC, but the market only fills 0.5 BTC in one direction and 0.4 BTC in the other. This creates imbalance and risk. The automatic rebalancing feature solves this problem by checking the balance every 2 seconds and placing market orders to align positions. This way, risk remains minimal, and arbitrage operates as intended.

Margin and available assets

Thanks to a unified trading platform, traders can use over 80 different assets as collateral. If you have 1 BTC worth 30,000 USDT as margin, you can simultaneously open a spot position and a contract position using the same asset. This significantly increases capital efficiency.

Platform Tools for Safe Trading

Arbitrage functionality is available exclusively in the mobile and web apps and is designed for users of a unified trading system in cross-margin mode. This restriction is implemented to ensure security and risk control.

Trading is supported for the following pairs:

• Spot assets (USDT or USDC) combined with perpetual contracts
• Spot assets (USDC) combined with futures contracts with a specified expiration date

Each automatic rebalancing round lasts 24 hours. If during this period orders are not fully executed, the system will cancel all remaining positions and end the strategy.

Step-by-step Order Placement Process

The process begins with selecting a strategy. Go to the tools section and find the arbitrage feature. All available trading pairs will be displayed with current funding rates and spreads. Choose the pair that suits you.

Next, select the direction (long or short) for the first market. The system will automatically set the opposite direction for the second market. The number of orders should be the same in both directions.

Then, choose the order type — market for instant execution or limit with your specified price. Enter the order size for only one side; the other will be filled automatically.

At the confirmation stage, ensure that the smart rebalancing function is enabled (this is recommended by default). This will protect you from imbalance during partial fills. After confirmation, the platform will start monitoring execution and automatically balance the position.

After placing the orders, you can track active positions in the “Active” section and view the full history in “History.” When the order is fully filled, check your contract positions (in the “Positions” tab), spot assets (“Assets” section), and earned funding fees (“Transaction Log”).

Common Questions About Arbitrage

When does it make sense to open arbitrage positions?

Arbitrage is most effective in several situations. First, when there is a clear spread between markets — allowing quick profit locking and avoiding slippage due to price fluctuations. Second, when trading large volumes, where simultaneous order placement reduces market impact. Third, when opening or closing complex positions that require synchronized execution across multiple markets.

How are profitability and risk calculated?

The spread is calculated as the difference between the sale price and the purchase price. The spread value is expressed as a percentage of the sale price. The annual return from the funding rate (APR) is calculated by summing the fees over the last 3 days, dividing by 3, multiplying by 365, and dividing by 2. Similarly, the annual return from spreads is calculated, but instead of a 3-day period, the remaining time until contract expiration is used.

Are liquidation risks possible?

Yes, there is a risk with uneven order execution. If one side fills significantly faster than the other, a imbalance in margin requirements may occur. That’s why it’s recommended to always enable the smart rebalancing function, which automatically aligns positions.

Does this function work with sub-accounts?

Yes, provided the sub-account is configured as part of a unified trading system. In demo mode, this feature is not yet available.

What happens if I disable automatic rebalancing?

The system will stop automatically adjusting positions and will consider that your orders are placed consciously in opposite directions. They will remain active until fully filled or canceled. This greatly increases the risk of imbalance, so disabling this function is not recommended.

When you decide to cancel an order on one market, the system will automatically cancel the corresponding order on the other market (if rebalancing is enabled), terminating the entire arbitrage strategy. This is another reason why careful planning before placing orders is essential.

Crypto arbitrage is a powerful tool for earning from market inefficiencies, but it requires understanding mechanics, attentiveness when placing orders, and constant monitoring of positions. Proper use of arbitrage strategies can provide steady income regardless of price movement direction.