1
Why capital sits on several exchanges
Cross-exchange arbitrage is fastest when both legs are pre-funded: stablecoins on the exchange where you buy, and coins or margin on the exchange where you sell. Waiting for a transfer during a live spread usually means missing it, so most traders hold inventory on every venue in their routes.
- Pre-funded accounts let you take both legs within seconds instead of waiting for confirmations.
- Each additional exchange in your routes divides your capital further - more venues is not automatically better.
- Futures-hedged setups need margin on both sides, plus buffer so a price move does not liquidate one leg.
2
Minimum viable size against fees
Percentage fees scale with size, but fixed costs do not: withdrawal fees, network fees and minimum order sizes hit small accounts hardest. A $20 withdrawal fee is 2% of a $1,000 transfer and 0.04% of a $50,000 transfer. Below a certain size, most transfer-based routes cannot be profitable at all.
- Fixed withdrawal and network fees set a floor under viable transfer-based trade sizes.
- Exchanges enforce minimum order sizes and minimum notional values per pair.
- Inventory-based and funding setups tolerate smaller capital better than transfer-based routes.
3
Sizing against liquidity
Capital also has a ceiling per trade: the order book only holds so much near the top. Pushing a large order through thin depth moves the price against you, and the slippage can erase a spread that looked comfortable. Useful trade size is bounded by the depth on the weaker of your two legs.
- Check depth at your price level on both legs, not just the best bid and ask.
- The thinner book of the two exchanges dictates your maximum sensible size.
- Splitting size across several smaller opportunities often nets more than forcing one big fill.
4
A practical capital plan
Start small, prove the loop, then scale. The first goal is not profit but confirming that your routes, fees and timing work as expected with real orders. Only after the mechanics are proven does adding capital multiply results instead of multiplying mistakes.
- Begin with sizes where a total loss of one trade is acceptable tuition.
- Track net results per route so you know which ones actually clear costs.
- Keep a reserve unallocated - opportunities cluster in volatile moments, and dry powder has value.
