TL;DR: CEX-DEX arbitrage means simultaneously buying a crypto-asset where it is cheaper and selling where it is more expensive, between a centralised and a decentralised exchange. Profit arises only if the price difference exceeds all costs: trading fees, network fees (gas), slippage (the gap between expected and actual price) and execution risks.
What can you expect?
- Time per week
- Substantial: several hours a week for setup, monitoring and maintenance of systems. Manual trading is usually too slow.
- Starting capital
- Many amounts are too small to cover costs: fixed network fees weigh heavily on small orders. Expect several thousand euros, spread across exchanges, and only money you can afford to lose.
- Typical setbacks
- Differences that vanish before your order is filled, failed transactions with fees, unexpected network fees and withdrawal problems.
- Costs
- Trading fees at the CEX and DEX, network fees (gas), slippage, fees for withdrawals or bridges and possibly costs for data and servers. Compare costs.
- Not suitable if…
- Not for beginners, for anyone without time or technical knowledge, or anyone expecting a fixed profit.
How it works
The same crypto can trade at a slightly different price on a centralised exchange (CEX, a company that holds your balance) and a decentralised exchange (DEX, working through smart contracts) at the same time. Arbitrage means trying to use the difference: buying on one side and selling on the other. In practice the difference is often closed within seconds by fast bots, and much of it goes on costs. You run risk of delay, a different fill price, a failed transaction, counterparty risk at the exchange and smart-contract bugs. There is no deposit guarantee on crypto, and MiCA covers providers, not prices. This is not a strategy for beginners.
Core principles
- 1. A price difference matters only after all costs
- 2. Account for execution risk: one side can succeed and the other fail
- 3. Bots are faster; manual trading usually has little chance
- 4. Use only money you can afford to lose and do not leave too much balance at one exchange
Step-by- step plan
- 1
Understand the risks first
Read about counterparty risk at exchanges, slippage and smart-contract risk. Think about what amount you can lose.
- 2
Set up accounts and wallets securely
Open an account at an exchange available in your country and create a separate wallet for the DEX. Turn on two-factor authentication and limit API keys to trading rights.
- 3
Calculate your break-even difference
Add up all costs: trading fees on both sides, network fees, estimated slippage. That total is the minimum price difference needed.
- 4
Test with small amounts
Run a few transactions with very small amounts to see how execution, costs and delay really turn out.
- 5
Record and review
Keep every transaction with prices, costs, slippage and result. Stop if you make no profit net of costs.
In detail
Why price differences arise
Crypto trades in many places, each with its own liquidity and buyers. On a DEX the ratio in a pool sets the price and a larger order causes slippage. As a result prices can briefly differ. That gap usually closes fast because many parties use it. A difference existing does not mean it can be exploited.
Speed and competition
Professional firms use automated systems with direct links to exchanges and advanced methods on DEXs. For an individual the opportunities are often gone before you can place an order. There may be niches (less traded coins or networks), but those often carry more risk: low liquidity, large slippage and unreliable contracts.
Costs: the profit equation
An arbitrage trade works only if: sell price - buy price > trading fees + network fees + slippage. Network fees on some networks can rise sharply within minutes, and a failed transaction also costs fees. See the worked example below. Account for costs that also arise on failed or aborted transactions.
Advanced techniques and risks
Techniques exist such as flash loans (borrowing within one transaction with no collateral) and bundling transactions. They require deep programming knowledge, and bugs or attacks on smart contracts can cost money. This is professional territory and not for a beginner.
- Knowledge of exchanges, wallets and network fees
- Programming and API skills
- Understanding of slippage and smart-contract risk
- Exchange account with API access
- Wallet for decentralised exchanges
- Price data and a cost calculation
- Programming skills for automation
- 01 The difference is still positive after all costs (trading, network, slippage), with a margin
- 02 There is enough liquidity on both sides for your size
- 03 You have balance ready on both sides so you do not have to transfer
- 04 You understand how the DEX, the smart contracts and the costs work
- 01 Both sides are filled and the position is closed
- 02 If one side fails, decide in advance how you close the open position and with what maximum loss
- 03 Stop if loss exceeds your preset limit or costs rise
Worked example
This is a hypothetical example with simple numbers. It is not an expectation.
You have balance on both sides. The price of ETH is €3,000 on the CEX and €3,050 on the DEX. You want to trade €5,000.
- Bought on the CEX: €5,000 / €3,000 = 1.6667 ETH
- Sold on the DEX: 1.6667 x €3,050 = €5,083.33
- Gross difference: €5,083.33 - €5,000 = €83.33
Costs:
- CEX trading fee 0.1%: €5,000 x 0.001 = €5.00
- DEX trading fee 0.3%: €5,083.33 x 0.003 = €15.25
- Network fee (gas): €20.00
- Slippage 0.2% on the DEX: €5,083.33 x 0.002 = €10.17
Net: €83.33 - €5.00 - €15.25 - €20.00 - €10.17 = €32.92 (0.66% of €5,000). If network fees rise to €60, the result is -€7.08. If the price difference vanishes before your second order is filled, you are left with an open position.
Hypothetical example, not advice.
Work it out yourself
Risks and risk management
- Execution risk: one side succeeds, the other does not, or the price changes during execution
- Slippage and cost spikes: network fees can rise sharply within minutes
- Counterparty risk: an exchange may restrict withdrawals, stall or fail; no deposit guarantee
- Smart-contract risk: bugs or exploits can cost you your funds
- Competition: professional bots erase many opportunities within seconds
- Tax: many transactions require precise records; consult belastingdienst.nl
- Test first with very small amounts or in a test environment
- Limit balance per exchange and keep a maximum daily loss
- Secure API keys (trading rights only, no withdrawal rights, with IP restriction)
- Record all transactions, costs and network fees accurately, including failed ones
Learn the basics
Key takeaways
- It all comes down to costs: trading fees, network fees and slippage can wipe out a small price gap entirely.
- You risk one side failing, leaving you with an open position.
- Professional bots are faster than manual trading. Do not expect an opportunity to stay open long.
- Crypto has no deposit guarantee; at an exchange your balance is exposed to counterparty risk.
Frequently asked questions
Do I need programming skills? +
Practically yes. Price differences vanish fast, so manual trading is usually too slow. That also brings the risk of bugs in your own software, which can cost you money.
What are the real costs per round trip? +
Add up trading fees on both sides, network fees, slippage and any withdrawal fees. Network fees can fluctuate strongly. Compare costs and allow a margin.
Can an individual do this? +
In theory yes, but competition from professional bots is heavy. Do not expect an opportunity to stay open long, and do not overlook the risks of leaving a balance at an exchange.
Origin
General technique