Arbitrage execution involves simultaneously buying and selling an asset across different markets to profit from price discrepancies. This strategy capitalizes on temporary inefficiencies where an asset, such as a cryptocurrency, trades at varying prices on distinct exchanges or platforms. Automated systems frequently conduct these operations at high speed to exploit fleeting price differences before market forces equalize them. Successful arbitrage relies on rapid trade placement and minimal transaction costs across multiple venues.
Context
The cryptocurrency market frequently presents arbitrage opportunities due to its fragmented nature and varying liquidity across numerous exchanges. Traders often utilize specialized bots to detect and act on these discrepancies, contributing to market efficiency by helping to align asset prices globally. Regulatory discussions surrounding market manipulation and high-frequency trading in digital asset markets often consider the role and impact of arbitrage.
The unified margin primitive aggregates collateral across multiple DeFi venues, fundamentally solving capital fragmentation for advanced on-chain trading.
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