Execution and slippage risk
A displayed quote may only be available for a small amount. Larger orders can move through multiple order-book levels and receive a worse average price. If one side fills and the other does not, the trader may be left with an unhedged position.
Measure results using executable bid and ask prices, order-book depth, fill rates and actual fees. A backtest based only on last-traded prices is not enough.
Transfer and settlement delays
Moving an asset between exchanges can involve blockchain confirmation times, network fees, exchange processing and withdrawal reviews. A price gap may close while a transfer is pending. Some traders pre-fund accounts at multiple venues, but doing so increases the amount of capital exposed to each platform.
Check whether deposits and withdrawals are enabled for the exact asset and network. Do not assume that a token with the same ticker is supported on every network.
Exchange and custody risk
An exchange or custodian may suffer an outage, security incident, insolvency, operational failure or withdrawal restriction. The user may not have the same protections as a bank depositor. Review the legal entity, custody model, terms of service and complaint process.
Keep account security strong and avoid granting unnecessary API permissions. Never share private keys or recovery phrases with a trading service.
Fees and hidden costs
Costs can include maker/taker fees, withdrawal fees, network fees, conversion spreads, funding, borrowing and slippage. Some platforms also impose minimum order sizes, account tiers or withdrawal limits. Small gross spreads can become negative after these costs.
Calculate the net result for the intended size and include the cost of moving funds or maintaining balances at multiple venues.
Market and leverage risk
Crypto prices can be volatile and liquidity can change quickly. Leverage magnifies exposure and can trigger liquidation. Stablecoin or quote-currency risk may also affect a strategy that assumes two markets are equivalent.
Never treat an arbitrage label as proof that losses are impossible. Official US investor guidance highlights volatility, custody and fraud risks in crypto-asset-related investments.
Regulatory and jurisdictional considerations
Rules depend on the product, activity, provider and country. US users should review relevant regulator information and verify whether a service is authorised or registered where required. UK-facing cryptoasset promotions are subject to the FCA financial-promotion regime; marketing must not be misleading and may require a compliant route or approval.
Before promoting or referring consumers in a jurisdiction, obtain qualified legal and compliance advice. A website disclaimer does not by itself make an unlawful promotion lawful.
Frequently asked questions
Can crypto arbitrage lose money?
Yes. Execution failures, fees, price movement, withdrawal restrictions, custody incidents and leverage can all create losses.
Are crypto arbitrage bots safe?
Safety depends on the operator, permissions, security design, execution method and user controls. No bot removes market risk.
Is crypto arbitrage legal in the US and UK?
The legal position depends on the activity, product and provider. Users and promoters should obtain jurisdiction-specific advice and consult official regulator guidance.