Say you have $1000 and 20 bitcoins of capital to work with, and the current price of bitcoins is $50 on both exchanges. Put $500 cash and 10 bitcoins on each o

Say you have $1000 and 20 bitcoins of capital to work with, and the current price of bitcoins is $50 on both exchanges. Put $500 cash and 10 bitcoins on each of the two exchanges. Then if the price rises to $55 on exchange A but doesn't move on exchange B, you can buy 10 more bitcoins on B and sell your 10 bitcoins on A for $550, you now have a balance of $1050 at A and 20 bitcoins at B. Since you started out with 20 bitcoins and $1000, and ended up with 20 bitcoins and $1050, you made $50 profit. You can only participate in trades in the other direction (buying bitcoins on A, selling on B) until and unless you can move the cash and bitcoins between the exchanges, which may take hours or days. Of course, there are a lot of assumptions built into these numbers: The numbers assume your trading is sufficiently small compared to the total market size that your operations won't change prices, and the exchanges and blockchain charge you no transaction fees. These aren't absolutely true in practice, of course, with the consequence that prices can deviate a little between exchanges without creating an arbitrage opportunity. Shorting would make things easier, because then you wouldn't have to keep the coins in your account at A in order to sell them, you could borrow them on demand, sell them, and then transfer from B or your wallet at leisure. Likewise, being able to move funds quickly would help you out by reducing the time when half of your capital is out of the game because you're moving it around (I'm assuming you'll transfer 10 bitcoins to A and $500 to B after you did the trade to get back to the original situation), and the other half is half-useless because it can only be used to trade in one direction. But neither of these features is necessary to allow you to make guaranteed profits when (or if) sufficiently large price differences appear.