How to Do Crypto Arbitrage Between Two Exchanges
Crypto arbitrage between two exchanges involves buying a cryptocurrency on one exchange at a lower price and selling it on another exchange at a higher price. Traders use this strategy to identify and evaluate price differences across cryptocurrency markets.
However, a price difference does not automatically mean a trade will be profitable. Trading fees, withdrawal costs, liquidity, slippage, and execution delays can reduce or eliminate the potential return.
This guide explains how to do crypto arbitrage between two exchanges online, how to calculate the spread, and how to evaluate opportunities using an arbitrage scanner.
What Is Crypto Arbitrage Between Two Exchanges?
Crypto arbitrage between two exchanges is a trading strategy that takes advantage of price differences for the same cryptocurrency across separate trading platforms.
For example, suppose BTC trades at $60,000 on Exchange A and $60,300 on Exchange B. A trader could consider buying BTC on Exchange A and selling the equivalent amount on Exchange B.
The initial price difference is $300 per BTC before costs.
This strategy is also called cross-exchange crypto arbitrage. Learn more in our guide to what cross-exchange crypto arbitrage is and how it works.
How to Do Crypto Arbitrage Between Two Exchanges
Follow these steps to evaluate a potential arbitrage opportunity.
Step 1: Choose Two Cryptocurrency Exchanges
Choose two exchanges that support the same cryptocurrency and equivalent trading pairs.
For example, you could compare the BTC/USDT spot market on Exchange A with the BTC/USDT spot market on Exchange B.
Before trading, check the exchanges' supported trading pairs, fees, withdrawal policies, deposit requirements, liquidity, security controls, and availability in your country.
You should also confirm that you can trade and withdraw the selected asset under each exchange's current rules.
Step 2: Compare Cryptocurrency Prices
Check the prices of the same cryptocurrency on both exchanges.
For example:
Exchange A BTC price: $60,000
Exchange B BTC price: $60,300
The gross price difference is:
$60,300 − $60,000 = $300
To calculate the gross spread percentage, divide the difference by the lower price and multiply by 100.
Gross spread percentage = ($300 ÷ $60,000) × 100 = 0.50%
The 0.50% spread is before trading fees, slippage, transfer costs, and other expenses.
For a practical method of identifying these differences, read how to find price differences between cryptocurrency exchanges.
Step 3: Check Bid and Ask Prices
Do not rely only on the last traded price displayed on an exchange.
When buying cryptocurrency, you generally need to account for the ask price. When selling, you need to account for the bid price.
Suppose the best ask on Exchange A is $60,020 and the best bid on Exchange B is $60,250.
Your executable gross difference is approximately:
$60,250 − $60,020 = $230 per BTC
This is more useful than comparing the two exchanges' headline prices because it better reflects the prices available to a trader attempting to execute the transactions.
The actual result can still differ if the order book changes before your orders fill.
Step 4: Check Liquidity and Order Book Depth
Liquidity determines how much cryptocurrency you can buy or sell without significantly affecting the execution price.
An exchange might display an attractive BTC price, but only a small quantity may be available at that price.
Before trading, check the available order-book volume, trading activity, bid and ask prices, and the size of your intended transaction.
A large spread may be unsuitable if there is insufficient liquidity to execute both sides of the trade at acceptable prices.
Step 5: Calculate All Trading Costs
Calculate the expected costs before executing the trade.
These may include:
- Buy and sell trading fees.
- Withdrawal and network fees, if transferring assets.
- Slippage on either exchange.
- Conversion costs, if different quote currencies are used.
- Funding costs, if derivatives are involved.
- Other account or transaction charges that apply.
Consider an illustrative example in which a trader buys 0.1 BTC at $60,000 and sells 0.1 BTC at $60,300.
Buy cost: $6,000
Sell proceeds: $6,030
Gross difference: $30
If the combined trading fees and other execution costs total $18, the remaining amount is $12.
This example is simplified and does not represent a live market opportunity or guaranteed return. Actual results depend on the prices and costs at execution.
The key formula is:
Net result = Sell proceeds − Buy cost − Trading fees − Slippage − Other costs
Only evaluate the opportunity after estimating the costs that apply to your particular trade.
Step 6: Decide Whether to Transfer Cryptocurrency
There are two common ways to manage assets across exchanges.
The first is to buy cryptocurrency on one exchange, transfer it to the second exchange, and sell it there. This approach may involve withdrawal fees, network confirmation times, and price changes while the transfer is pending.
The second is to maintain balances on both exchanges before an opportunity appears. For example, you could keep USDT on Exchange A and BTC on Exchange B. If the spread is suitable, you may be able to buy on one exchange and sell on the other without waiting for a transfer during execution.
Pre-funded balances can reduce transfer-related delays, but they require capital on multiple platforms and introduce additional custody and exchange risks. You may also need to rebalance your holdings afterward.
Step 7: Execute the Buy and Sell Orders
Once you have confirmed that the opportunity may justify the costs, execute the buy and sell orders as close together as practical.
For example:
- Buy the selected amount of BTC on the exchange offering the lower executable price.
- Sell an equivalent amount on the exchange offering the higher executable price.
- Check the filled quantities and average execution prices.
- Review any unfilled orders or partial executions.
- Calculate the actual net result.
Execution timing matters because prices can change between transactions. If only one order fills, the trader may be left with unwanted exposure to the cryptocurrency's price movement.
Step 8: Monitor the Spread and Rebalance Funds
After execution, record the actual result and review whether the opportunity remains available.
Arbitrage activity can cause prices on the two exchanges to move closer together. This can reduce the spread and make an opportunity less attractive.
If you maintain balances on both exchanges, monitor the amount of each asset remaining. Rebalancing may be necessary to prepare for future trades.
Always account for transfer costs and risks before moving assets between platforms.
How to Find Crypto Arbitrage Opportunities Online
Manually comparing multiple exchanges can be time-consuming, especially when prices change quickly.
A crypto arbitrage scanner can help traders monitor market prices and identify differences that deserve further evaluation.
Useful information to compare includes:
- Current bid and ask prices.
- Gross spread and spread percentage.
- Order-book depth and available liquidity.
- Estimated trading fees.
- Withdrawal and transfer requirements.
- Potential net spread after applicable costs.
PokoBit is an AI-powered arbitrage platform designed to monitor cryptocurrency market differences and help traders evaluate potential opportunities across supported markets.
Instead of relying only on a manually calculated price difference, traders can use an automated workflow to identify spreads and assess the relevant trading conditions.
Visit the PokoBit homepage to explore the platform.
Common Mistakes to Avoid
Ignoring Trading Fees
A displayed spread may disappear after the buy and sell fees are deducted. Calculate the total costs before trading.
Comparing Last Traded Prices
Last traded prices do not necessarily reflect the prices available for your order. Compare executable bid and ask prices instead.
Overlooking Liquidity
A market may show a wide spread but lack sufficient order-book depth for your intended trade size.
Depending on Transfers to Complete Every Trade
A transfer can take long enough for the price difference to disappear. Consider transfer timing and network conditions before choosing your execution method.
Assuming Arbitrage Is Risk-Free
Arbitrage does not eliminate risk. Price movements, partial fills, exchange outages, withdrawal restrictions, liquidity problems, and operational errors can all affect the outcome.
Frequently Asked Questions
Can I do crypto arbitrage between two exchanges online?
Yes. You can compare the same cryptocurrency across two online exchanges, evaluate the executable spread after costs, and decide whether the opportunity justifies a trade.
How much money do I need to start crypto arbitrage?
There is no universal minimum. Your starting capital depends on the exchanges, trading fees, minimum order sizes, liquidity, and strategy. Small balances may be disproportionately affected by fixed withdrawal and network fees.
Do I need to transfer cryptocurrency between exchanges?
Not always. Some traders transfer assets after buying, while others maintain balances on both exchanges so they can potentially execute both sides without waiting for a transfer.
How do I calculate crypto arbitrage profit?
Subtract the purchase cost and all applicable trading fees, slippage, transfer costs, and other expenses from the sale proceeds. The result is the net outcome for the trade.
Can a crypto arbitrage scanner find opportunities automatically?
An arbitrage scanner can monitor prices and identify potential spreads across supported markets. Traders should still verify liquidity, execution prices, fees, and risks before placing orders.
Is crypto arbitrage between two exchanges guaranteed to make money?
No. A spread may narrow or disappear before execution, and costs or unexpected market conditions can turn an apparently attractive opportunity into a loss.
Conclusion
Crypto arbitrage between two exchanges involves identifying a price difference, buying where the executable price is lower, and selling where the executable price is higher.
The process requires more than comparing displayed prices. Traders need to check order-book depth, liquidity, trading fees, transfer requirements, slippage, and execution risks before entering a trade.
Automated arbitrage scanners can make market comparison more efficient by helping traders identify potential opportunities across supported exchanges. The final decision should still be based on the expected net result and the risks involved.
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