Market neutral arbitrage is a trading strategy that seeks to profit from price discrepancies between related assets while minimizing exposure to overall market price movements. This approach involves taking offsetting positions in different markets or instruments to cancel out general market risk. For digital assets, it might involve simultaneously buying a cryptocurrency on one exchange and selling it on another, or trading spot against futures. The goal is to capture small, predictable gains from inefficiencies.
Context
Crypto news frequently discusses market neutral arbitrage strategies employed by high-frequency trading firms and sophisticated investors to exploit fleeting price differences. The profitability of such strategies depends on execution speed, low transaction costs, and sufficient liquidity across trading venues. The persistence of arbitrage opportunities often indicates market inefficiencies or fragmentation.
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