An arbitrage ceiling represents the highest point at which profitable price differences for a digital asset exist across various trading platforms. This limit is determined by the total costs involved in executing an arbitrage trade, including fees and market impact. Beyond this threshold, the expenses of moving assets and executing trades exceed any potential gains. It effectively marks the boundary where market efficiency eliminates further opportunities for risk-free profit.
Context
Reports on arbitrage ceilings often pertain to the overall efficiency and interconnectedness of global cryptocurrency markets. A low or consistently met arbitrage ceiling indicates a highly liquid and integrated market where price discrepancies are quickly resolved. Conversely, a higher or more volatile ceiling can signal market fragmentation, liquidity issues, or elevated transaction costs impacting trader strategies. This metric offers insights into market maturity and the operational friction within the digital asset trading environment.
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