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What is Arbitrage?

Arbitrage is a trading strategy in which you purchase a digital asset on one exchange and almost instantly sell it on another platform where the price is better.

Typically, market inefficiencies are the main cause of arbitrage. This benefits arbitrageurs since it makes markets more effective. It also ensures that the same asset is priced identically on many exchanges. Arbitrageurs reduce the "spread" between these exchanges by buying on the less costly one and selling on the more expensive one. This reduces the chance of arbitrage and makes markets more effective. Arbitrage is a key factor because it prevents assets from deviating from their fair value for an extended length of time and improves the liquidity flow between exchanges.