What is Arbitrage?

To arbitrage is to exploit the price difference of an asset or security between two markets for profit. For example, if one bitcoin (BTC) is selling for USD 40,000 on exchange ABC and USD 40,015 on exchange XYZ, then an arbitrageur can generate a profit of USD 15 for every BTC they arbitrage between these exchanges. Arbitraging can be automated by utilizing sophisticated computer systems and software to monitor prices and conduct high-volume trades that take advantage of even slight differences in price. Arbitrage is a necessary financial mechanism that keeps prices consistent between different exchanges and other financial markets.