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What is arbitrage? Profiting from the same price in two places

By SendPay Business · · 2 min read

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Arbitrage is buying something in one place and selling it at the same moment somewhere else for a higher price. In theory the same asset should cost the same everywhere, so any gap is a chance for a small, quick profit.

Examples

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Crypto

a coin trades slightly cheaper on one exchange than another, so a trader buys on the first and sells on the second.

Triangular forex

three exchange rates, such as GBP to USD, USD to EUR and EUR to GBP, briefly do not line up, so going round the triangle ends with more than you started with.

Retail

buying a product on sale in one shop and reselling it elsewhere for more.

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Why the gaps close fast

Professional traders and automated systems watch prices constantly, and each arbitrage trade pushes the prices back together. In big markets like major currency pairs, gaps usually last only fractions of a second.

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Hidden costs and risks

Trading fees, spreads, withdrawal fees and transfer times can wipe out a small gap. Prices can move while money is in transit between exchanges, and an exchange can pause withdrawals. Arbitrage is often called risk-free, but in practice it rarely is.

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Where SendPay fits

SendPay does not offer trading tools or arbitrage. SendPay crypto platforms let your customers buy, sell and hold crypto next to their cash, with assets held with regulated partners and a trading fee you set.

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How it works

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Questions people ask

How do I check a three-currency loop?

Enter the three rates and a fee per exchange in the free calculator.

Triangular arbitrage calculator →
What is slippage?

When a trade fills at a worse price than expected.

Slippage →
What is a market maker?

Who keeps prices tight on exchanges.

Market makers →
Can I launch my own crypto app?

Yes, with a trading fee you set.

See platforms →

Read next

Spotted a mistake or something out of date? and we'll fix it. How our guides are made

This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. Other companies named in this guide are reference points only and are not affiliated with SendPay Business.