What is Crypto Arbitrage & How Does It Work? (Guide)
Crypto arbitrage involves buying a cryptocurrency on one exchange where the price is lower and selling it on another where the price is higher, profiting from the difference. The strategy exploits price discrepancies across hundreds of global crypto exchanges due to factors like fragmented liquidity and regional demand.
Crypto arbitrage is a trading strategy that involves buying a cryptocurrency on one exchange and selling it on another where the price is higher. The practice exploits price discrepancies across global crypto exchanges. In 2017, Bitcoin traded at $18,000 on US exchanges and $21,000 on South Korean platforms, creating a 15% gap. Traders who moved money between markets pocketed the difference. Crypto markets are fragmented, with hundreds of exchanges globally, each with different liquidity and regional demand. The Kimchi Premium, a persistent price gap between South Korean crypto exchanges and global markets, is a notable example. At its peak in January 2018, the Kimchi Premium hit 54.48%. Regulations, such as South Korea's 2024 Virtual Asset User Protection Act, can reshape crypto arbitrage opportunities. The act reduced local exchange liquidity by 22% by August 2025.
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