Arbitrage

Arbitrage

Marketplaces are inherently inefficient due to a variety of factors, including the lack of information that different participants have access to, trading tools and techniques. Transaction costs and human psychology also play a role in this. Differences in market prices are not uncommon, which can lead to an inefficient and unfair use of the same asset (e.g., cryptocurrency).

Arbitrage traders can profit by buying an asset in one market and then selling it in another market at a higher price. They make use of the difference in prices among certain markets to make quick profits.

One of the main reasons why arbitrage trading exists is usually due to market inefficiencies. Arbitrageurs will make money by fixing these inefficiencies & ensuring that different assets are priced the same. Through buying on the cheaper exchange and selling on a more expensive one arbitrageurs limit the gaps between these exchanges. This also limits the chance to exploit an arbitrage opportunity and makes markets more efficient. A form of trading where the difference in price on two different exchanges is used to make money. It prevents assets from going too high or too low and helps ensure higher liquidity between exchanges.

Since this strategy exploits price differences between two different exchanges, arbitrageurs are very likely to avoid any issues with changes in prices. This is one downside of arbitrage, since it relies both on in

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