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Arbitrage involves attempting to profit from price differences in the same good or product, and crypto arbitrage is no different: Market participants may be able to make money by exploiting price differences for the same cryptocurrency. Those differences may occur across different exchanges or platforms, opening up the opportunity to buy, sell, and possibly generate a return.

Note, though, that arbitrage involves substantial risk, so caution is warranted.

What Is Crypto Arbitrage?

Cryptocurrency arbitrage is a strategy in which market participants buy a cryptocurrency on one exchange, and then attempt to quickly sell it on another exchange for a higher price. Cryptocurrencies are purchased or sold on many different exchanges, and often the price of a coin or token may differ slightly on one exchange versus another.

That’s where the strategy of arbitrage comes in: Similar to using arbitrage in other capital markets, crypto arbitrage is a legal way to earn a potential profit when an asset is selling cheaper in one market and at a higher price in another. That said, crypto arbitrage comes with some potential risk factors.

Why Do Price Differences Exist Between Exchanges?

The regulations of crypto markets are nuanced and varied, and cryptocurrencies are decentralized and therefore (with the exception of stablecoins) not pegged to government or fiat currencies like the dollar. This is one of the primary reasons why the prices of different crypto can vary widely: there is no standard price for any particular coin or token.

Related to this, some crypto exchanges are bigger than others, with higher trading volume. Thus the supply and demand on one exchange could be quite different from another, affecting the price.

Finally, crypto trading fees also vary, and can add to the cost of your transactions.

How Does Crypto Arbitrage Trading Work? A Step-by-Step Look

As noted, crypto arbitrage involves trading the same cryptocurrency for different prices on different platforms or exchanges. Arbitrage comes with the risk of prices changing during the process of buying and selling cryptocurrency. However, here’s how crypto arbitrage might work in theory, assuming prices remain the same.

Step 1: Identifying Arbitrage Opportunities

In a very general sense, identifying an arbitrage opportunity in the crypto market could be as simple as noticing that some type of cryptocurrency, let’s say Crypto X, is trading for $1 on Exchange 1, but trading for $1.50 on Exchange 2.

That price discrepancy means there’s an opportunity to generate a profit by purchasing Crypto X for $1 and then selling it for $1.50.

Step 2: Executing the Purchase and/or Sale

The next step to take advantage of the price discrepancy is to actually execute the transactions. That could be a bit more intensive than it sounds, since you’re trading on two different exchanges or platforms.

But in effect, let’s say you purchase $10 worth of Crypto X on Exchange 1, and transfer it to your crypto wallet. Then, you log on to Exchange 2, make sure your wallet and holdings are connected, and then sell Crypto X for $15.

Step 3: Calculating Profits (and Losses)

When all is said and done, you should now have $15 in cash, a profit of $5 from when you first started (not taking any fees into account), and a 50% return due to your arbitrage activities. Don’t forget there’s taxes to pay, of course.

And always keep in mind that you can lose money through crypto arbitrage, too, such as if the price of the cryptocurrency purchased drops before it’s sold. There’s no guarantee that you’ll come out ahead in the crypto markets.

Common Arbitrage Strategies

There are some different ways that crypto arbitrage can be conducted with different types of cryptocurrencies.

Simple Arbitrage (Cross-Exchange Arbitrage)

This type of arbitrage is more or less what was spelled out in our example above. It involves finding a price discrepancy between exchanges, buying from one, and selling to the other to attempt to generate a profit. While this is a simple tactic that can take advantage of price discrepancies, it may expose you to risks like transfer times and costs.

Spatial Arbitrage

Spatial arbitrage is very similar to simple arbitrage, but is distinct in that there are price differences between an asset trading in different geographic locations.

Triangular Arbitrage

Triangular arbitrage takes advantage of pricing inefficiencies among different pairs of cryptocurrencies, often on the same exchange. With this strategy, someone starts with one cryptocurrency and then sells it for another cryptocurrency — one which is undervalued relative to the other.

The participant would then transact that second cryptocurrency for a third cryptocurrency which is relatively overvalued when compared with the first. Finally, they would transact that third cryptocurrency for the first crypto, completing the circuit potentially a little richer.

Weighing the Opportunity: The Pros and Cons of Crypto Arbitrage

Crypto arbitrage has some pros and cons to be aware of.

The Appeal of Crypto Arbitrage

Crypto arbitrage can be an appealing strategy for a few key reasons. Notably, it’s a market-neutral strategy, meaning that it’s theoretically possible to make money regardless of overall market conditions. So, if the stock market is taking a downturn, that doesn’t mean you couldn’t potentially generate returns through crypto arbitrage.

Additionally, the crypto trading markets go non-stop, worldwide, and there are thousands of cryptocurrencies out there. That means there’s a potentially large number of opportunities for crypto arbitrage, if you can find them.

The Risks of Crypto Arbitrage

There are also significant risks you should take into account when engaging in crypto arbitrage. Perhaps most notably, price slippage, which means that the price discrepancy that you are attempting to exploit suddenly disappears, leaving someone “holding the bag,” so to speak, after they initially purchase the cryptocurrency.

There can also be delays and congestion on platforms, which can slow down transactions and potentially lead to price slippage. There are transaction fees to take into account, as well, and it may even be possible to break the rules of a given platform, meaning that your activity is frozen or put on hold.

Tax Implications of Arbitrage

Arbitrage can trigger tax liabilities.

In the U.S., where cryptocurrency adoption has skyrocketed in recent years, the IRS has created a tax guide which categorizes cryptocurrencies as property, like stocks, bonds, and other capital assets.

Entities that engage in arbitrage are required to pay capital gains taxes on cryptocurrency when selling, trading, or disposing of their holdings. (Additionally, cryptocurrencies can be taxed as income if an individual receives the crypto as a gift, from mining, or for services rendered.)

With that in mind, you must account for any capital gains taxes on their federal income tax return, but may also be able to take deductions based on any losses. Be aware that state taxes may also need to be reported, where applicable. You should also receive a form from your brokerage or trading platform to help you calculate your tax liabilities and fill out your tax return.^[1]

As always, it may be helpful to discuss with an accountant or financial professional.

Note, too, that cryptocurrency taxation rules are evolving, so it’s best to try and keep track of the latest changes to rules and regulations.

Why Every Arbitrage Transaction May Be a Taxable Event

Given that cryptocurrency is considered “property” in the U.S. for taxation purposes, each transaction will result in either a capital gain or loss. In the case of crypto arbitrage, gains from transactions would likely be taxed as short-term gains, which applies when a digital asset is held (as a capital asset) for one year or less. Short-term gains are taxed as ordinary income, which is typically higher than the rates for digital assets held for longer than a year.^[2]

In short, that’s why each arbitrage transaction triggers a taxable event: You’re generating a capital gain or loss with each transaction.

The Importance of Meticulous Record-Keeping

New rules are making it easier to keep track of your transactions through a brokerage or trading platform, along with capital gains or losses and respective tax liabilities. But it’s still a good idea to try and keep meticulous records, to ensure that you’re paying any applicable taxes that you owe.

Until recently, keeping track of your capital gains or losses on crypto holdings was entirely up to the individual, which is why it was so important. It’s still up to you to report your transactions correctly, as it’s possible that your platform or exchange could make a mistake.

A Note on Professional Advice

Again: It could be a good idea to ask an accountant or financial professional for help or to answer any questions you may have about your tax liabilities resulting from crypto trading activity. It can be confusing, and the laws and rules are in flux, so don’t be afraid to reach out.

Crypto Arbitrage Bots and Platforms

A couple of other things that you should know about: Arbitrage bots and platforms.

What Are Crypto Arbitrage Bots?

Why manually buy or sell when you could use bots to do it for you? That’s actually an option, as there are programs on the market that can identify arbitrage opportunities, and automatically execute purchases or sales on someone’s behalf. Of course, this requires some technical know-how and a fairly high risk tolerance, but these “bots” are more or less automated software sequences that are used by some to try to generate returns.

Popular Arbitrage Platforms and Scanners

There are numerous crypto trading platforms, services, and software on the market. Some incorporate trading bots directly into their platforms, too. Some examples of these include Pionex, Bitsgap, Cryptohopper, ArbitrageScanner, and 3Commas. It’s important to do your own research to figure out if any platform might work for your specific situation and strategy.

The Takeaway

Arbitrage exists across the capital markets, in stocks, bonds, and commodities, wherever the same asset buys or sells for different prices in different places. Since cryptocurrencies are digital and aren’t based on an underlying asset (with some exceptions, such as stablecoins), it is harder to place a value upon these currencies, and they don’t have the same pricing conventions as equities and bonds, which are tied to the performance of a company, municipality, or nation.

Cryptocurrency is complicated, and arbitrage strategies can be even more complex. But the practice is legal, and has the potential to yield rewards while also exposing a participant to high risk.

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FAQ

Is crypto arbitrage still profitable?

Crypto arbitrage can be profitable, but it also involves considerable risk. There’s no guarantee of a positive return.

How much money do you need to start crypto arbitrage?

It’s possible to attempt to profit from discrepancies in crypto prices with a relatively small amount of money, especially since many cryptocurrencies buy and sell for fractions of a cent. It’s important to remember that arbitrage is risky, however, so any amount of money put toward crypto arbitrage — big or small — could potentially be lost.

Is crypto arbitrage legal?

Yes, crypto arbitrage is legal in most regions so long as you’re doing it in a place where crypto trading is legal.

What is the fastest way to find crypto arbitrage opportunities?

Perhaps one of the quickest ways to find crypto arbitrage opportunities is to use a scanner or trading bot to flag those opportunities for you. Otherwise, it could take considerable time and effort to manually compare prices between exchanges and platforms.

Can you lose money with crypto arbitrage?

Yes, there is a high risk of losing money with crypto arbitrage, as prices are always in flux.

Can you make a living off of crypto arbitrage?

It theoretically may be possible to make a living off of crypto arbitrage, but it would likely be challenging to do, and it’s important to remember there are significant risks involved with crypto arbitrage, as well.

SOCRYP-Q325-048

Do you find yourself dreaming about what you would do if you were a millionaire? Maybe you fantasize about retiring early and traveling the world. Or perhaps what excites you is the thought of being able to donate to causes you care about. But, you might be wondering how to become a millionaire? You may suspect the only way you’ll ever be that rich is if you win the lottery.

Fortunately, the road to wealth isn’t that narrow; there are many ways to become a millionaire. For instance, some individuals retire with over a million dollars in savings because they made good financial decisions. Others may have started businesses that brought them success, advanced their careers so that they made enough to save seven figures, or made smart investments. Read on to learn more about how to become a millionaire, and strategies that could help get you there.

Introduction to the Millionaire Mindset and Goals

Many millionaires are not born into wealthy families or individuals who suddenly struck it rich. In fact, many millionaires are people who work for a living every day. In general, what tends to set them apart is that they have a millionaire mindset. They are smart and disciplined when it comes to their money. And they stay focused on their financial goals.

Defining What It Means to be a Millionaire

The true definition of a millionaire is someone with a net worth of at least $1 million. That means that their assets, minus any debt, is $1 million or more.

So, if you have $500,000 in savings and investments, plus a house that’s worth at least $500,000, you’d meet the criteria. If, that is, you own the house outright and don’t have a lot of debt such as car loans, student loans, or credit cards to pay off. But if you still owe money on your house and you’ve got a fair amount of debt to repay, you probably aren’t a millionaire. At least, not yet.

To do the math for your situation, total up your assets. Then subtract your debts from that amount. This will show you how close you are to reaching millionaire status, and possibly give you a sense of what you might have to do to get there.

Following these eight strategies can help when it comes to how to become a millionaire.

Step 1: Try to Avoid Debt

As we just saw in the example above, one thing that could be holding you back from becoming a millionaire is debt, especially if that debt is “bad debt,” a term often used for high-interest debt. Eliminating your debt is key because it’s difficult to build wealth if you’re paying a significant portion of your income toward interest.

Paying off debt could help free up money to invest and build wealth. One way to repay debt is to use the debt avalanche method. With this technique, you pay off your debts with the highest interest rates first and then focus on debts with the next highest interest rates (while still making minimum payments on all of your debt, of course).

Eliminating debt isn’t just about paying off existing debt, though, it’s also about avoiding the chances of going into debt in the future. Part of a debt payoff strategy could involve spending less so that you don’t need to rely on credit. You can also set a strict budget and pay with cash whenever possible.

In addition, you may want to create an emergency fund by setting aside a certain amount of money every month. That way, if you have a financial setback, you don’t have to go into credit card debt.

Recommended: Ready to build your emergency fund? Use our emergency fund calculator to determine the right amount.

Step 2: Invest Early and Consistently

Investing successfully doesn’t happen overnight. It takes time. That’s why you need to start early. There are a few rules to know that could help you improve your chances of becoming a millionaire.

Benefits of Compounding Returns

First, compounding returns can make all the difference. They can help your money grow, as long as the returns are reinvested.

Here’s how they work: Compounding returns depend on how much an investment gains or loses over time, which is known as the rate of return. The longer your money is invested, the more compounding it can do. That’s why some individuals start saving aggressively when they’re young.

Saving $100,000 by the time you’re 30 might not be possible for everyone, but the more you save early on, the greater impact it could have on your net worth.

And here’s the thing: Even if you’re in your 30s, 40s, or 50s now, it’s never too late to start saving. The important thing is that you start, period. And that you keep saving.

There are other investing strategies that could help as you work on how to become a millionaire. For instance, you could reduce the amount you spend on investment fees. High investment fees can have a big impact on your returns, so you might want to look into low-fee investments.

Also, you should make sure that you invest in a way that’s right for you throughout your life. That may mean investing more aggressively when you’re younger and gradually becoming more conservative in your investments as you get older and closer to retirement.

Step 3: Make Saving a Priority

Your savings is the amount of money you have left after paying taxes and spending money.

Many Americans aren’t saving enough to become a millionaire — in September 2025, the average personal savings rate was 4.7%, according to the Bureau of Economic Analysis. You’ll likely need to save more than three times that amount to become a millionaire.

Effective Saving Strategies for Long-term Wealth

To save for your goals, you might consider starting by investing in your company’s 401(k). Max out your 401(k) if you can. At the very least, invest at least enough to earn the employer match, if there is one. That way your employer is contributing to your savings.

In addition, consider opening a traditional IRA or a Roth IRA and contribute as much as possible, up to the limit set by the IRS. These IRAs are tax-advantaged, so they’ll help with your tax bill, too.

And investigate other savings options, as well, such as contributing to a child’s 529 college savings plan.

Step 4: Increase Your Income

You can’t join the ranks of millionaires if you’re not bringing in more money than you need for your basic necessities. The more money you make, the more you can save and invest.

Tips for Boosting Earnings and Maximizing Income

Some ways to boost your income include asking for a raise or looking for a new higher-paying job. You could also go back to school to earn an advanced degree that could lead to a position with a higher income. Your current employer might even help you cover the cost; check with your HR department.

Another one of the ways to earn extra money is to take on a side hustle. You could tutor students on evenings or weekends, do freelance writing, or dog sit. And those are just some of the options to consider.

Step 5: Cut Unnecessary Expenses

Getting control of your spending is critical to building wealth. That doesn’t mean you have to cut back on everything that gives you pleasure, but you could consider the happiness return on investment you get from the money that you spend. How big of an apartment or home do you truly need to be content? What kind of car do you need? Do you have to buy lunch out every day or could you bring your own lunch from home?

Identifying and Eliminating Non-Essential Spending

You could find ways to cut back on the things that don’t matter so much, but not skimping to the point that you miss out on things you love. For example, maybe you need your gym sessions (and there are plenty of low-cost gyms out there), but you can do without purchasing a coffee every morning.

Also, you could focus on cutting back on big expenses instead of those that won’t have a huge impact on your budget. For example, dining out only once a month, adjusting your thermostat higher or lower depending on the season, or finding a less expensive, smaller home could help you save a significant amount of money over time.

Step 6: Keep Your Financial Goals in Focus

To become a millionaire, you’ll need to stay laser-focused on your financial goals. When everyone else around you is spending money, going on fancy vacations, and buying expensive cars, remind yourself what’s truly important to you. Keep your spending in check, continue to save and invest, and avoid taking on debt.

It takes discipline. But instead of thinking about the stuff you don’t have, appreciate all the good things in your life, like your family and friends. Remember that you’re saving for your future. You’ll be able to enjoy yourself then if you have the money you need to live comfortably and happily.

Think of it this way: You’re making yourself and your financial security the priority. Make that your mantra.

Step 7: Consult With Investment Professionals

Investing can be complicated because there are so many options to choose from. If you need help figuring out what investments are right for you, consider working with a qualified financial advisor.

Leveraging Advice for Wealth Building

A good financial advisor could help you select the right investments and the best investing strategies for your situation. They can also help you plan and budget to reach your goals. But be sure to be an active participant in the process. Ask questions, be involved. Why are they suggesting a specific investment? And if you don’t feel comfortable with something, say so.

Finally, be sure to check your investment performance regularly. Know what you are investing in, how much, and why.

Recommended: How to Find the Best Investment Advisor For You

Step 8: Repeat and Refine Your Financial Plan

The final step to becoming a millionaire is to stay committed to your goal and your plan. Keep saving and investing your money. Stay out of debt. Let time and the power of compounding returns kick in. Be patient.

But also, don’t be afraid to refine or change your plan if need be. For instance, as you get closer to retirement, you will likely want to choose safer, less aggressive investments. You can keep saving and growing money throughout different ages and stages, but your method for doing so can evolve to make sense for where you are in your life.

Additional Tips for Wealth Building

In addition to all of the strategies above, there are a few other techniques that may help you reach millionaire status.

Lifestyle Considerations and Spending Habits

As you work your way up the ladder and earn more money throughout your career, you may be tempted to increase your lifestyle spending, too. After all, you have more money now, so you may feel the urge to spend it.

But here’s the thing: Giving in to these temptations can be a slippery slope. It might start with a bigger house in a nice neighborhood, and then grow to taking extravagant vacations and driving a luxury car. Before you know it, you could be spending way more than you’re saving.

Try to avoid lifestyle splurging if you want to be a millionaire. Instead, take the extra money and save and invest it. That way, you’ll be able to reach your goal even faster.

The Takeaway

Becoming a millionaire is possible if you take the right approach. It involves saving and investing your money, spending wisely, and avoiding debt. You need to be disciplined and focused, and it won’t always be easy. But staying committed to your goals can reward you with financial security and success.

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FAQ

How much money does the average person save?

As of September 2025, the average personal savings rate in the United States was 4.7%, according to data from the Bureau of Economic Analysis.

How many millionaires are there in the U.S.?

There are nearly 24 million millionaires in the United States as of 2025, which is roughly 40% of the world’s total.

What steps can people follow to try and become a millionaire?

Some strategies that could help individuals reach $1 million net worths include avoiding debt, investing early and consistently, prioritizing saving, increasing income, cutting unnecessary expenses, keeping goals in focus, working with professionals, and periodically refining your financial plan.

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