A market condition permits a digital asset to be simultaneously bought and sold on different exchanges or markets to profit from a price disparity. This practice capitalizes on temporary inefficiencies, often arising from latency in price discovery or differing liquidity across trading venues. Successful execution requires rapid transaction speeds and minimal slippage to secure the price differential. Such opportunities are frequently observed in volatile cryptocurrency markets.
Context
The prevalence of arbitrage opportunities in digital asset markets remains a significant topic, particularly with the rise of decentralized exchanges and cross-chain operations. Market participants constantly monitor for these discrepancies, influencing trading bot development and liquidity provision strategies. Regulatory scrutiny surrounding high-frequency trading and market manipulation could impact the future viability and structure of these profit-seeking activities.
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