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1inch is a decentralized exchange (DEX) aggregator built on Ethereum. It is a type of liquidity protocol specialized with providing customers with the most favourable and most convenient transaction route by automatically aggregating offers from other decentralized exchanges.

Due to the different structures of various decentralized exchanges such as Uniswap, Aave, etc., the selling price of the same digital currency is slightly different on different exchanges.

Therefore, 1inch will also send transactions to different decentralized trading platforms to achieve the purpose of significantly saving costs and reducing transaction slippage.

Among the transaction platforms supported by 1inch are Uniswap, Kyber, Aave, Curve.fi, Airswap, mStable, Balancer, dForce Swap, 0x API, and 1inch’s very own- Mooniswap.

1inch Liquidity Protocol V2 version

The V2 version of the 1inch Liquidity Protocol uses a mechanism that increases with price slippage to ensure that liquidity providers and 1INCH token pledgers obtain higher returns through volatility.

It contains the 1inch Pathfinder algorithm. The algorithm acts as a bridge to split an exchange transaction by effectively using the many “market depths” in the same protocol.

“Market Depth” is an important indicator of the supply and demand relationship of cryptocurrencies based on the number of publicly-traded orders.

The V2 version of the 1inch Liquidity Protocol fully shortens the response time and helps users process transactions more efficiently.

Source: Dune Analytics

According to the data of Dune Analytics, it can be seen that 1inch’s transaction volume has surged after the end of 2020, mainly due to the arrival of the main updated version of its platform “V2”. 1inch’s V2 platform adds some more complex transactions to the original basis to keep prices low, such as rescheduling funds dedicated to loan collateral for the decentralized lending protocols Aave and Compound.

Source: Dune Analytics

Although the monthly new/old users ratio has been reduced, it remains at greater than 1, implying that the number of new users of 1Inch is increasing at a gradually decreasing rate. But we believe that if V3 appears in the near future, by incorporating more Decentralized Finance (DeFi) protocols, upgrading algorithms, and making transactions cheaper. It will attract greater liquidity,

1inch Token:1INCH

The platform launched its crypto token 1INCH on Christmas 2020. The total circulation is 1.5 billion pieces. The main function of 1INCH tokens is the participation of governance, such as modifying transaction fees, recommendation rewards, and so on.

There are two types of governance: pool governance and factory governance. Users can use it to vote on the operation of the 1inch platform and achieve instant governance.

As of April 30, 2021, according to Coinmarketcap, the value of the token is $5.45 with a market capitalization of $850,539,232.54. Among the total supply of 1.5 billion, there are 156,671,623 1-inch tokens in circulation.

1inch is not only an aggregator but also has its own exchange Mooniswap. Therefore, governance can be divided into liquidity agreement governance and aggregation agreement governance.

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DODO is a decentralized exchange operating on the Ethereum blockchain that utilizes the algorithm of the Proactive Market Maker (PMM) to provide users with tokens to earn transaction fees.

According to DeFi Pulse data, DODO’s native token DODO is now ranked 37th with a $59.1 million total value locked in the decentralized finance (DeFi) market. It has only been listed for two months and is a relatively new project in the crypto space.

Some of the decentralized exchanges we are familiar with, such as Uniswap, use algorithms such as automatic market maker (AMM), allowing investors to deposit funds into the on-chain liquidity pool in advance, in a completely decentralized and non-custodial manner, all the while providing seamless transactions between cryptocurrencies.

However, traditional AMM possesses the pain points of impermanent loss, low capital efficiency, insufficient liquidity utilization, and multi-token risk exposure.

In order to solve the above problems, DODO created the Proactive Market Maker (PMM) algorithm, which aims to generalize the order book matching system.

High capital utilization

PMM adjusts the pricing curve by using a price prediction system so that a larger part of the liquidity is concentrated around the market price of assets. This enables more active and frequent transactions, thereby improving capital efficiency and reducing impermanent losses. As shown below, near the market price, the DODO curve is flatter than the Uniswap curve, indicating higher capital utilization and lower slippage.

Unilateral transaction

At the same time, PMM allows market makers to deposit solely unilateral assets of a certain trading pair, so traders do not need to bear bilateral risks.

Low transaction costs

The DODO mainnet integrates the Chainlink oracle, which provides price updates by aggregating responses from twenty-one different price feeds, and reasonably allocating less costly transaction fees to liquidity providers.

DODO has gained the approval of many top global investment institutions including Three Arrows Capital, Binance Labs, Coinbase Capital, and Alameda Research, to name a few. Dodo is currently listed on the Binance and FTX exchange.

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A DEX, or decentralized exchange, is a blockchain-based exchange that allows traders to directly exchange encrypted tokens with each other.

It does not store user funds and personal data on the server but performs all operations through smart contracts on the blockchain, which is different from traditional centralized exchanges (CEX). Traders can achieve direct peer-to-peer transactions on a DEX without intermediaries. Just like centralized crypto exchanges, they have advantages and disadvantages.

First of all, we need to understand the operating mechanism and the difference between a CEX and a DEX.

Centralized exchange operating mechanism

In centralized exchanges such as Binance and Coinbase, all the core steps of transactions, including recharge, order placement, order matching, and delivery, and cash withdrawal, are all completed on the exchange. For example, investors need to provide their bank statements and some identity information before depositing money on the platform to buy cryptocurrencies.

However, traders do not really hold the digital assets. Rather, they entrust their virtual currency holdings to the exchange and all transactions occur in the database of the centralized exchange.

In other words, this is similar to a traditional bank transaction service. The customers deposit the principal in the bank. The bank will then give you a bank account, which is equivalent to the existence of a private key in a centralized cryptocurrency exchange. However, the bank has ultimate control.

Decentralized exchange (DEX) operating mechanism

Decentralized exchanges use smart contracts to facilitate the transaction of tokens, but they do not actually enjoy the control of tokens. First, orders will be collected into the DEX order pool through authorized smart contracts for other users to view. Other users can choose whether to execute the order. After confirmation, the relevant transaction information will be uploaded to the chain, and the entire transaction process will be completed through a smart contract. Therefore, decentralized exchanges such as Uniswap, 1inch, Balancer, and SushiSwap all rely on blockchain infrastructure to operate.

DEX has three ways to process orders: on-chain order book, off-chain order book, or automatic market maker method.

Advantages of DEX

On a CEX, the wallet stores the funds of all users, making a large amount of funds vulnerable to hack attacks. Once a problem occurs, the consequences are disastrous, which is why DEX is more secure in comparison.

On a DEX, the platform is responsible for providing liquidity for transactions without controlling actual assets.

Decentralized exchanges protect users’ personal information, and users transacting on decentralized exchanges do not need to provide personal information such as social security numbers or addresses.

Disadvantages of DEX

Compared with a CEX, a DEX has a slower transaction speed and a higher cost. Because every transaction record will be recorded in the blockchain network, more computing power is needed, making transactions slower.

Compared with a CEX, a DEX will not provide corresponding customer service, making the user experience less optimal than with a CEX.

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A non-fungible token (NFT) is a special type of encrypted token that represents unique collectibles. An NFT is used in specific applications that require unique digital items, such as encrypted art, digital collectibles, and online games.

This is in contrast to cryptocurrencies like Bitcoin, and many networks or utility tokens that are fungible. Fungible tokens can be exchanged with each other because they hold the same value similar to a simple exchange between banknotes of the same denomination.

Features

Irreplaceability

NFTs cannot be copied or divided between different holders. Just like a unique piece of art, NFTs are valued because of their cultural significance and social capital value and holding famous works. NFTs are also very popular among artists because a portion of any resale price will be directly returned to the original author.

Tokenization of physical assets

In the blockchain world, NFT means that each token has its own value and distribution characteristics. Another difference with homogenized tokens is that non-financial transactions are indivisible. The most common token standard for NFT is ERC-721.

Through Ethereum’s ERC-721 standard, it is possible to prove that a digital file is a unique “original file” to solve the problem of digital file copying, and to confirm its authenticity and uniqueness. Non-fungible tokens immutably prove digital ownership.

Access to the actual asset

When you purchase an NFT, you not only obtain an immutable ownership record of the asset but also gain access to the actual asset.

Market cap

According to industry data company NonFungible, as of March 30, there have been 5,498,710 transactions in the NFT market, with a total transaction volume of $557,623,962.02

Non-fungible tokens & DeFi

Non-fungible tokens not only operate on the Ethereum blockchain, but they can also run on other decentralized networks, such as EOS and NEO. These decentralized networks all have the function of smart contracts with a box full of NFT tools, so developers can describe metadata in detail.

NFT has increasingly begun to be integrated into the decentralized finance (DeFi) sector.

For example, the DeFi protocol Yearn Finance has developed an insurance product Y.Insure for virtual currency assets.

Y.Insure uses the NFT mechanism (ERC-721) to represent the unique attributes of insurance policies.

Other DeFi projects with NFT bearings include MEME, Bancor, and Enjin.

Trading places

Non-fungible tokens can be traded on OpenSea, Nifty Gateway, Nifty Gateway, MakersPlace, Rarible, SuperRare, and other platforms.

History

Around 2017, the two earliest NFTs to be created and to gain popularity were CryptoPunks and CryptoKitty. CryptoPunks contains 10,000 cute animations of human bodies and animal characters. CryptoKitty is a set of images of fantasy cats, which were originally given away for free. However, the most valuable CryptoKitty is now worth more than $100,000, and CryptoPunks is worth more than $1 million.

Another major player driving the NFT boom is “NBA Top Shot”, a video-based virtual basketball trading card website launched in October last year.

NBA TopShot provides NBA-authorized basketball-themed collections and is the defending champion in the NFT market so far.

Source: NBA TopShot via NonFungible

NBA Top Shot accounted for the largest NFT product with a total transaction volume of $459.71M. So far, over 276,350 transactions has been processed on the network.

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When transferring Bitcoins, we all need to communicate with the receiver’s Bitcoin address. Bitcoin addresses are anonymous and do not contain information about the owner. Almost everyone who has been in contact with Bitcoin for a period of time has dealt with different types of Bitcoin addresses.

Anyone can generate Bitcoin addresses for free. You can also use an account in an exchange or online wallet service to obtain a Bitcoin address. You can also choose to generate it offline and store it on paper or in a hardware wallet, but do you know that there are three types of Bitcoin addresses? they are, respectively:

Legacy (P2PKH) format

The address starts with “1”, which is the address format used by Bitcoin since its original source, and it is also the most common address format . As for P2PKH, it is an abbreviation of “Pay To PubKey Hash”.

Nested SegWit (P2SH) format

Addresses start with “3”. From this format, we can’t distinguish whether they are MultiSig addresses or Segregated Witness compatible addresses. P2SH is the abbreviation of “Pay To Script Hash” and  it supports more than Legacy Functions with more complex formats , such as specifying multiple digital signatures to authorize transactions.

Native SegWit (Bech32) format

The address starts with “bc1” and belongs to the local SegWit address format, an address format developed specifically for SegWit. Some exchanges may not yet have an address that supports this format. At present, there are three types of Bitcoin addresses in this format. The Bech32 format is the least common of the three.

Since more transaction data can be stored in a single block, and the Bech32 format address itself is compatible with SegWit, no extra space is needed to put the SegWit address into the P2SH address, so the average cost of sending Bitcoin from this address may be lower .

Bech32 was defined in BIP173 (Bitcoin Improvement Proposal, used by Bitcoin code developers) at the end of 2017. One of the main features of this format is that it is case-insensitive (the address only contains 0-9, a-z), so when you enter the address it can effectively avoid confusion and make it easier to read. Since the address requires fewer characters, the address uses Base32 encoding instead of the traditional Base58, which makes the calculation more convenient and efficient. Data can be stored more closely in the QR code.

Bech32 provides higher security, better optimizes the checksum error detection code, and can minimize the chance of invalid addresses.

What is SegWit?

SegWit is a soft fork that occurs on the Bitcoin blockchain. SegWit (Segregated Witness) is an upgrade protocol developed by the Bitcoin community in 2015 to solve the scalability problem faced by the blockchain network. It was officially implemented in August 2017. Its central idea is to reorganize block data so that signatures are no longer stored with transaction data, so that more transactions can be stored in a single block to increase the transaction throughput of the network. 

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Tendies aims to be the next-generation autonomous and hyper deflationary cryptocurrency. Tendies, has called itself the “Dogecoin of the DeFi age,” and has recently launched its Uniswap pool in July 2020. 

Oddly enough, the term “tendies” actually refers to chicken tenders, and could also be referred to the imaginary prizes that can be redeemed for money made from speculative investments. 

Tendies is an introduction of a deflationary currency, which is rare to find with national fiat currencies. However, risks remain in this nascent industry as a user has exploited the deflationary STA token on lending protocol Balancer to steal over $500,000 in funds. 

Tendies currently has a market capitalization of over $348,000 and ranks 1532nd in terms of market cap, according to CoinMarketCap. Tendies (TEND)’s all-time high price was $3.05 on Sept. 11, 2020, but has plunged to trading at $0.048 at press time. Tendies (TEND) return on investment (ROI) year to date is -93.15%.

The origin of the Tendies crypto

Although the origin of the Tendies (TEND) cryptocurrency remains unclear, but there is a strong connection to 4chan’s imageboard, which has been promoting TEND. 

The term Tendies has been popular among Robinhood traders on the subreddit r/WallStreetBets, a forum where memes are shared about trading. 

How it works

Tendies started with a total supply of 9 million tokens, and the TEND tokens are continuously transferred from a liquidity pool on decentralized exchange (DEX) Uniswap to a pool on the Tendies website. The TEND tokens have been generated using funds collected during public presales in mid-July 2020. The rate of TEND being transferred everyday is 4 percent. 

A user can then request a command to drain the pool, which in turn, the user would receive 1 percent of the pooled tokens. 51 percent of the tokens are then burned, and 48 percent of the tokens remaining are added to the “Tendies Bucket.”

The Tendies Bucket is distributed to the top holders of the TEND tokens every three days. Although only the top holders are qualified for these bonuses, the exact number is yet to be revealed. As the supply of TEND is reduced from the pool from Uniswap and is burned afterward, logically, the TEND token price would steadily increase. 

Tendies funds

Tendies funds are not accessible by any team member on the team, with the launch of Uniswap V2. A smart contract has been deployed to ensure that no one can control any TEND tokens. The liquidity pool funds initially were provided by presale funds.

Tendies’ disclaimer expresses that the project is a social experiment and that risks are always present when acquiring TEND, much like the rest of the cryptocurrency market.

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Bitcoin Exchange Traded Fund (ETF) is a type of security that tracks the overall price of Bitcoin and enables investors to trade and purchase shares of it on traditional exchanges, circumventing crypto trading platforms.

It combines the most popular digital asset in the crypto space – Bitcoin – and exchange traded funds. To understand Bitcoin ETFs properly, an investor needs to grasp the concept of an ETF.

What is an ETF?

An ETF is an exchange traded fund that regroups various securities belonging to the same sector. By holding an ETF, an investor will have access to a selection of stocks all pertaining to the same category, such as the banking industry, the tech industry, or the oil industry. ETFs offer diversity to an investor’s portfolio and provides a mixture of investments such as stocks, commodities, and bonds. The price of an ETF fluctuates throughout the day, as the value of the underlying asset, be it gold, Tesla, or Bitcoin, fluctuates and shares of it are bought and sold on the market. There are various types of ETFs, notably bond ETFs, industry ETFs, commodity ETFs, currency ETFs, and inverse ETFs.

Advantages of owning Bitcoin ETFs

A Bitcoin ETF combines traditional ETF and Bitcoin. Several advantages are associated with owning a Bitcoin ETF, as opposed to owning the actual underlying cryptocurrency. Investors may be more comfortable with ETFs, as cryptocurrencies are still relatively new hedges. By owning Bitcoin ETF, investors will not have to deal with the troubles that may potentially come with owning actual Bitcoin and storing it. Owning Bitcoin means that an investor will have to acquire a crypto wallet, deal with the crypto exchange that comes with muddled regulatory clarity at times, and own private keys.

The security of Bitcoin ETF is overseen and taken care of by a trusted third party, usually a banking institution, rather than the investor himself.

Also, new trading options are available through ETFs, such as “short-selling”. This is a practice through which the ETF is borrowed, on the premise that it will be bought back in the future at a lower price. The investor bets on the price of the Bitcoin ETF dropping, borrows the security, sells it on the market, and buys it back when the price drops.

As bitcoin ETF is a type of security, it has clear regulations, thus avoiding issues often associated with cryptocurrencies, such as tax concerns, regulatory uncertainty, and conforming to AML/CFTC.

Bitcoin ETFs still relatively new

The first Bitcoin ETF to be proposed originated from the Winklevoss twins, who handed in the first application of a Bitcoin ETF to the Securities and Exchange Commission (SEC) in 2013. The US Patent and Trademark Office proceeded to award them with a patent for “exchange-traded products.”

The primary concern with bitcoin ETF is in the volume of scam associated with Bitcoin and the volume of Bitcoin on the market. On July 24, 2018, Bitwise filed for its own Bitwise ETF Trust. On April 18, 2019, the answer they got from the SEC read, “Although Bitwise does a better job of explaining bitcoin than other bitcoin ETF proponents, there does seem to be some question as to if their analysis of bitcoin volume is correct.” On Jan 15, 2020, Bitwise withdrew the Bitcoin ETF application.

The birth of Bitcoin ETF seems easier in some countries more than in others. Recently, in September 2020, Bermuda also approved Bitcoin ETF and registered it on its very own Bermuda Stock Exchange. The Toronto Stock Exchange also offers a similar Bitcoin ETF, called The Bitcoin Fund.

However, for the time being, there is no Bitcoin ETF available for trade in the United States, though it exists on European and Asian exchanges, as well as over-the-counter Bitcoin Trusts. Europe and Asia seem to have a more forward attitude towards cryptocurrencies, having clearer cryptocurrency regulations, and integrating crypto into their financial products.

The reason behind the US SEC’s hesitance in registering Bitcoin ETFs is due to the volatile nature of the digital asset, which may create high risk in an investment portfolio as well as scams in volume.

Bitcoin ETF vs Bitcoin Trust

The closest thing to a Bitcoin ETF may be GBTC, a financial investment vehicle offered by the Grayscale Bitcoin Trust. Investors in the Grayscale Bitcoin Trust can trade and hold Bitcoin shares without actually owning the underlying cryptocurrency. There are two ways to acquire GBTC shares. One is to buy the GBTC stock through an over-the counter market, notably the OTCQX. The other is a bolder move, which is to own shares of the company directly, a hefty $50,000 purchase.

As Bitcoin has been gaining in popularity, it can be argued that it will only be a matter of time before Bitcoin ETFs are normalized.

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Arbitrage is a term used to describe a profit-earning trading method that takes advantage of imbalances in prices between markets. Cryptocurrency and Bitcoin (BTC) arbitrage similarly take advantage of pricing differences in digital assets on crypto exchanges.

Crypto arbitrage exploits the fact that cryptocurrencies can have significant price differences depending on the exchanges that sell them. In simple terms, crypto arbitrage occurs when an asset like Bitcoin is simultaneously bought and sold in two markets—the same asset bought for a lower price on one exchange and sold for a higher price on another to profit on the price variance.

Cryptocurrency and Bitcoin Arbitrage: An Overview

Bitcoin and cryptocurrency trading are huge, with billions of dollars worth of crypto being transacted in millions of trades. There are dozens of exchanges now operating globally that provide crypto services. However, there can be significant differences comparatively on exchanges for the prices of digital currencies listed—making the crypto industry ripe for arbitrage.

Arbitrage traders take advantage of the price differences on exchanges and play these variances off each other to make a profit. For example, an exchange like Binance may list Bitcoin for $15,200 while Kraken lists the BTC for $15,000 at the same time. An arbitrageur will buy the lower Kraken price and sell on Binance to make a quick profit of $200. This is called spatial arbitrage.

Sounds easy, but of course there is more to it than that otherwise, we would all be rich. Bitcoin arbitrage, in particular, was far easier in its early years, as the price of BTC would fluctuate wildly from exchange to exchange, with much wider price gaps for traders to exploit. In crypto arbitrage, it is all about speed. The example above is quite exaggerated and such a clear gap in price is unusual, however, given the extent of decentralization in the crypto sector, such discrepancies can happen very frequently.

The smaller price gaps between that do exist do not last very long. Arbitrageurs need to be quick to take advantage of these gaps which creates the risk, but if timed correctly, the profits can be huge.

BTC Price variance between exchanges: Source - Coinrankings.com

A recent example where crypto arbitrage was rampant occurred when Filecoin was first launched on exchanges in October 2020. The discrepancy in price was massive—the price of a single Filecoin (Fil) on exchanges varied with Fil on Uniswap trading at $25.56, and Gemini exchange pricing Fil at $29. Although it is not relevant to arbitrage, even popular crypto price aggregators had little consensus on the price of Filecoin and Fil was $68 according to CoinMarketCap while competitor CoinGecko had priced Fil at $29.

Types of Crypto Arbitrage

There are three main types of crypto arbitrage—the first is called spatial arbitrage, which is the most common and takes advantage of the price imbalances of exchanges and we have discussed this in the previous section.

The other two methods are cross-border arbitrage and statistical arbitrage.

Cross-border arbitrage is similar to spatial arbitrage with the key difference being that the two exchanges being played off one another are in different countries. Arbitrageurs often have difficulty in executing cross-border arbitrage as the countries that put a higher premium on some assets are usually able to do so as the users cannot access outside markets, which means it may be difficult to move assets between these markets.

Statistical arbitrage is the most sophisticated method but also carries the most risk and is heavily reliant on speed and is based on mathematical modeling. This technique employed by crypto arbitrageurs involves using trading bots and algorithms that capitalize on pricing discrepancies that may only exist for the briefest moment.

Triangular Arbitrage

As any two cryptos can be trading pairs, any other crypto can be a medium of exchange. This type of arbitrage is called Triangular arbitrage.

Triangular cryptocurrency arbitrage is a popular method that allows the trader to remain on one exchange and avoid and exchange withdrawal fees or delays in transfer.

The crypto arbitrageur takes three different cryptocurrencies after identifying that one or more of these currencies is undervalued. A trader may see an opportunity involving Bitcoin, XRP, and ADA and would trade his BTC for XRP, then in turn use the XRP to buy ADA and then use the ADA to buy back the BTC. If they were able to effectively leverage one or more undervalued cryptos in the triangle, they should end up with more BTC than when they began.

The main advantage is that in all triangular trades, a trader gets a riskless profit as soon as the second trade is fulfilled. However, it should be noted that this type of arbitrage is rare and is definitely not easy—which is why modern crypto and Bitcoin arbitrage traders prefer using bots and software. Also, triangular arbitrage needs to consider risky price fluctuations of the crypto as the exchange medium.

Arbitrage Opportunity Extension—Bots and Tools

As mentioned, Bitcoin and cryptocurrency arbitrage are all about speed, and price spreads may only exist for an incredibly short period of time. To execute cryptocurrency arbitrage effectively, a trader will have to be able to compare all prices in real-time across exchanges to configure and submit their trade before the gap disappears.

As volatility subsides and the crypto market reaches greater maturity, attempting to trade in these gaps manually in 2020 and make a profit is near impossible.

With time, arbitrage now evolves into a mature way of profit with complex arbitrage algorithms and tools.

Besides searching for arbitrage opportunities by relying on experience, veteran traders also now commonly leverage Bitcoin arbitrage tools with which, they can set different arbitrage parameters and these rules will be triggered automatically when the requirements are met.

Arbitrage Market in Decentralized Exchanges (DEX)

Compared to centralized exchanges, there are significant differences in price models and pricing mechanisms in DEXs. Most DEXs use automated market makers (AMM) instead of the traditional order book model.

The pricing mechanism of AMM is different as well. Take the leading DEX Uniswap as an example, it uses Constant Product Formula (CPF) to determine the price and price changes.

The new DEX price model and pricing mechanism bring new opportunities for arbitrage as well as new complexities. But in essence, all arbitrages are based on the price difference of any given crypto.

Actually, arbitrage is encouraged in decentralized exchanges to make its price system more stable. In Uniswap V2, the DEX introduced flash swaps that allow users to withdraw up to the full reserves of any ERC20 token on Uniswap and execute arbitrary logic at no upfront cost. These flash swaps obviate upfront capital requirements and unnecessary order-of-operations constraints for multi-step transactions involving.

Uniswap also encourages the use of trading bots. These crypto arbitrage bots seek profits by comparing prices across different platforms to find an edge in value and execute the trade quickly.

As most decentralized exchanges are based on Ethereum, there are no direct non-Ethereum arbitrage opportunities. But there are wrapped tokens. Wrapped Bitcoin (WBTC) is an example that reserves the power of Bitcoin while inheriting the flexibility of an ERC20 token and which is backed 1:1 with Bitcoin 100% and verifiable.

Is Crypto Arbitrage Legal and Worthwhile?

Crypto arbitrage opportunities arise from exploiting mispricing between exchanges, but the practice is completely legal. So why doesn’t everyone do it?

There are many factors to consider for crypto arbitrage, for instance, exchange platforms used will normally charge fees for transactions and often withdrawal fees. As the gaps necessary for profit are so small, failing to factor in these fees by traders could see a loss of profit.

Time is of the essence and another concern with exchanges can be delays that can be associated with executing withdrawals. Crypto arbitrageurs have a limited time frame to get funds from one platform to another, a delayed transfer could cost the trader all expected profits.

Other factors that need to be considered are regulatory—particularly for cross-border arbitrage as there are different KYC and AML compliances for different jurisdictions.

Crypto arbitrage is not for new and inexperienced traders and those who have plenty of experience in the marketplace are known to have higher levels of success. New traders may see the possibility of capitalizing on a price inconsistency but often fail to consider the myriad of factors above—fees, regulation, and timing.

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