What is arbitrage? Profiting from the same price in two places
By SendPay Business · · 2 min read
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
- 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.
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.
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.
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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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. PayPal, Patreon and Substack are named as reference points only and are not affiliated with SendPay Business.