Young and still immature, the cryptocurrency markets are the perfect
playing field for arbitrage traders because low liquidity in some
exchanges or trading pairs (difference in supply and demand across
exchanges) may result in significant price fluctuation.
frequency traders in the traditional markets battle over every per
mille, high single-digit and even low double-digit spreads are emerging
on a daily basis in the cryptocurrency markets.
Nevertheless, it is
important to understand that when markets have some discrepancy in
pricing between two pairs, there isn’t always a guaranteed arbitrage
Often a transaction costs may take away the benefits of the
possible arbitrage opportunity.
Even some of the most liquid
cryptocurrencies such as bitcoin can have price spreads of up to 10%
across different exchanges due to the difference in demand, a lack of
pricing regulation, and difficulties trading between some exchanges.
Arbitrage opportunities will exist as long as exchanges are isolated. It
doesn't matter if prices go up or down: the more they fluctuate, the
greater the arbitrage opportunities!