Arbitrage is low-risk compared to directional trading — but it is not zero risk. These 8 risks have caught beginners off guard. Know them before putting in real capital.
When you place a large market order, your trade itself moves the price before both legs fill. On thin altcoin pairs, a $5,000 order can shift price by 0.2–0.5% — wiping your entire spread before execution completes.
Slippage is worst on low-liquidity pairs and during high-volatility events. BTC and ETH perps handle up to $50K with near-zero slippage. Altcoins with OI under $5M are dangerous.
Only trade signals with 2%+ gap — this gives buffer above worst-case slippage. Check open interest before entry. Avoid pairs with OI under $5M. Use limit orders where possible.
A 0.3% price gap can close in under 2 seconds once spotted. Manual execution — switching tabs, copying prices, placing orders one by one — is too slow for small gaps. By the time both legs fill, the opportunity is gone and you may be left with a one-sided position.
This is why ArbVertex only signals gaps above 2% — large enough to survive the 10–30 second manual execution window.
Pre-set limit orders before signals arrive. Only trade gaps 2%+. Use ArbVertex entry windows — each signal includes an exact price range and time window. Never chase a gap that has already started closing.
Positive funding rates can flip negative within a single 8-hour period if market sentiment shifts sharply. When this happens, you stop earning and start paying — $15/day income becomes −$15/day loss on a $10,000 position.
Reversals are most common after sudden bearish news, market-wide liquidation cascades, or when funding has been extremely high for several days and mean-reverts.
Set a hard exit rule: close the trade if funding drops below +0.01% for 2 consecutive payments. Monitor funding 30 minutes before each settlement (00:00, 08:00, 16:00 UTC for Binance/Bybit). ArbVertex Telegram bot alerts you automatically.
Exchanges can freeze withdrawals, get hacked, or in rare cases become insolvent (FTX being the most extreme example). Funds held on an exchange are not insured — if the exchange fails, recovery is uncertain and slow.
Spreading capital across exchanges reduces single-point-of-failure risk, but also means more accounts to manage and monitor.
Only keep capital on exchanges that is actively deployed in a trade. Never leave large idle balances. Stick to tier-1 exchanges — Binance, Bybit, OKX, Gate. Withdraw profits regularly to a personal wallet.
In futures arbitrage, your short position requires margin. If the price of the coin spikes sharply upward, your short futures position loses unrealised value. Without sufficient margin buffer, the exchange will force-liquidate your short — leaving you with an unhedged spot position exposed to full price risk.
This is the most severe single event in futures arbitrage. A 20% price spike with 3× leverage and thin margin can wipe an entire position.
Always maintain 2–3× the minimum required margin. Use 1× leverage only — you do not need leverage in funding rate arbitrage. Set a margin alert at 150% of maintenance margin so you can top up before liquidation triggers.
When an exchange announces a coin delisting, the futures contract is force-settled — often at an unfavourable price. If you hold a short futures position when this happens, you may be settled at a price far from spot, destroying your hedge and exposing you to directional loss.
Delistings are announced with little warning — sometimes only 24–72 hours notice. Altcoin pairs are most vulnerable.
Avoid pairs with recent delisting rumours or low exchange support. Check that the pair exists on at least 3 major exchanges before entering. Exit immediately if a delisting announcement appears — do not wait for settlement. See our full Delisting Risks guide →
Exchanges occasionally suspend withdrawals for maintenance, regulatory issues, or liquidity problems. In spot arbitrage, this can leave you stranded mid-trade — unable to move the coin to the target exchange to close the gap.
Even 30-minute withdrawal suspensions can be enough for a 3% gap to fully close, turning a planned profit into a forced hold at loss.
Before any spot arb trade, verify withdrawal status on both exchanges. Check the exchange status page and community channels for any reported issues. Futures arbitrage avoids this risk entirely — no coin transfer is needed.
Arbitrage returns look small per trade (0.5–2%). Beginners often try to amplify returns with 5× or 10× leverage on the futures leg. This completely destroys the delta-neutral nature of the strategy — a 10% price move against your leveraged short can liquidate the position before the hedge catches up.
Leverage in arbitrage is not a performance booster. It is a risk multiplier that removes the core safety of the strategy.
Use 1× leverage only on the futures leg. The income in funding rate arbitrage comes from the funding rate — not from leverage. If returns feel too slow, increase capital size, not leverage.
| Risk | Severity | Primary Mitigation |
|---|---|---|
| Slippage | MEDIUM | 2%+ gaps only, check OI > $5M |
| Execution Lag | HIGH | Pre-set limit orders, 2%+ gaps only |
| Funding Reversal | HIGH | Exit below +0.01%, monitor before settlement |
| Exchange Risk | MEDIUM | Tier-1 only, withdraw profits regularly |
| Margin Liquidation | HIGH | 2–3× margin buffer, 1× leverage only |
| Delisting Risk | HIGH | Exit on announcement, avoid low-support pairs |
| Withdrawal Freeze | MEDIUM | Check status before spot arb, use futures arb |
| Overleveraging | HIGH | 1× leverage only — no exceptions |