People new to crypto arbitrage are easily persuaded by a clean number.
Venue A shows 1.2% cumulative funding over 30 days. Venue B shows 0.2%. A one-percent gap looks like an easy trade: open two opposite positions and collect the difference. Real money quickly shows that the number is only the beginning.
One leg fills while the other price jumps. The two notionals look close but mark prices drift apart. Funding is paid twice, then sentiment changes and the spread fades. When it is time to exit, the book is much thinner than it was at entry.
Return matters. It just cannot be the only thing that matters.
Why is the spread still there?
Markets rarely leave an easy spread untouched for long. A persistent spread usually comes with work: capital on multiple venues, collateral transfers, matched sizing, fees, slippage, and attention when the market is moving fast.
Some traders stay on one familiar venue. Some chase a move and care more about speed than funding. Others know the spread exists but do not want the work of opening two legs and monitoring margin. Those frictions create the room an arbitrageur is trying to capture.
Three questions before entry
- Where did the spread come from?
You do not need a research report, but you need a plausible explanation: crowded longs, a fresh listing, higher leverage, or a different user base on one venue. The reason helps you judge how long the setup may last.
- How long has it lasted?
One-hour data can be exciting. Thirty-day data can hide that the good days are already behind you. Compare 7D, 14D, and 30D together. If the structure is fading in the most recent week, slow down.
- How will I get out?
“Market order” can be the most expensive two words in arbitrage. Check order-book depth, your share of normal volume, and whether you can exit in pieces under stress.
A hedge still needs management
Two opposite positions reduce directional exposure, but each venue has its own mark price, margin model, funding schedule, and deleveraging rules. One leg can become stressed even while the other is profitable. Reconcile both notionals and both margin balances regularly.
Repeatability matters more than the fattest spread
The biggest spread is not always the best setup. A durable trade has workable liquidity, manageable transfers, easy position matching, and a realistic exit when the market turns. Long-term results usually come from repeating a simple process with fewer mistakes.