CEX-DEX Spreads

Structural Differences Create Opportunities

Centralized exchanges (CEX) and decentralized exchanges (DEX) operate on fundamentally different models, creating persistent arbitrage opportunities. CEXs like Binance use order books where buyers and sellers place limit orders. DEXs like Raydium use automated market makers (AMMs) where algorithms determine prices based on pool ratios.

These structural differences mean prices often diverge, especially during volatile periods. When major news breaks, CEX prices typically move first as professional traders react quickly. DEX prices lag as they wait for arbitrageurs to rebalance pools. This lag creates profitable windows for those monitoring both markets.

Liquidity differences amplify opportunities. CEXs generally have deeper liquidity on major pairs, meaning large trades have less price impact. DEXs might have shallow liquidity, causing significant slippage on large trades. Skilled arbitrageurs factor these differences into their calculations.

Access requirements create regional price variations. Many CEXs require KYC verification and restrict users from certain countries. DEXs are permissionless - anyone with a wallet can trade. This means prices can vary based on geographic demand and regulatory differences.

Executing CEX-DEX Arbitrage

Successful CEX-DEX arbitrage requires accounts on multiple venues and careful execution planning. Start by identifying spreads that exceed your total costs including trading fees, withdrawal fees, network gas, and potential slippage.

Timing is critical. CEX withdrawals can take minutes to hours depending on the asset and exchange policies. During this time, spreads might close or reverse. Many traders maintain inventory on both CEX and DEX to execute immediately, then rebalance positions afterward.

Consider network congestion when calculating profitability. High gas prices on Ethereum can eliminate profits on smaller trades. Solana's low fees make it ideal for arbitrage, but you still need to factor transaction costs into every calculation.