Definition ∞ Token arbitrage involves simultaneously buying a digital token on one exchange where its price is lower and selling it on another exchange where its price is higher. This strategy capitalizes on temporary price differences between markets for the same cryptoasset. It relies on rapid execution to profit from transient inefficiencies.
Context ∞ The prevalence of token arbitrage reflects market inefficiencies and varying liquidity across different trading platforms in the crypto ecosystem. Automated trading bots frequently execute these operations, contributing to price equalization across exchanges while also competing for profitable opportunities. Understanding arbitrage activity helps gauge market maturity and integration.
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