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Author: Admin | 2025-04-27
Prices of both exchanges should equalize, and the arbitrage trader should have a net profit from both positions. Spot, Perpetual and Futures ArbitrageDuring periods of volatility and huge liquidations, bitcoin prices between spot, perpetual, and futures can diverge larger than during normal market conditions. An arbitrage trader could take advantage of the price difference of bitcoin between the different markets to make money without risk. For example, on exchange A, a large short liquidation has occurred, and the bitcoin perpetual contract price goes to $20,000, but its spot price is only at $19,900. An arbitrage trader will buy bitcoin at $19,900 and short bitcoin at $20,000 to remain delta-neutral. When the volatility subsides, the prices of both markets usually equalize or go back to their standard differences, and the arbitrage trader should have a net profit from both positions in the end. The same principle can apply with futures contracts when a larger and normal deviation occur between spot and futures prices due to futures liquidations. Spatial ArbitrageSpatial arbitrage follows the same concept as cross-exchange arbitrage. The difference is that you’ll buy and sell your crypto using exchanges in two different parts of the world. The example we shared about the Kimchi premium in South Korea showcases how spatial arbitrage works. Apart from South Korea, spatial arbitrage is also often used with South African exchanges, which are also limited by regulations and often have prices that are higher than market rates.Interest Rate ArbitrageMany cryptocurrency exchanges offer borrowing and lending options to their users. However, the interest rates they offer often vary. This means you can borrow an asset like bitcoin at a low-interest rate from one exchange and then lend it for a higher interest rate on another. A large interest rate difference is usually more common for decentralized money
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