What is Arbitrage Trading?
Arbitrage trading in the context of crypto investment is one of the ways investors generate profits. It involves the act of taking benefits from the price differences on different exchange platforms. The prices of cryptocurrencies on each exchange or trading platform are not the same. This happens because the price of an asset or commodity is influenced by the "Supply and Demand Theory". It is a fundamental concept in economics that when demand increases, the price also rises. When supply is limited, the price increases as well. This applies to the world of crypto as well.
Another factor that affects these price differences is the level of popularity of an exchange or trading platform itself. The more popular a platform is, the more users it attracts, and the greater the potential for increased demand for a token/coin. Therefore, arbitrage trading occurs when an investor buys a token/coin on a low-priced exchange platform and sells it on a higher-priced exchange platform.
Shariah Perspective
We refer to one of the fundamental doctrines in fiqh muamalat, which states:
"The primary ruling for contracts and conditions in financial dealings is permissibility (unless proven otherwise)".
Therefore, arbitrage trading can be seen as a regular buying and selling activity in different locations. If the coin/token is considered as a digital asset, it must fulfill the conditions placed on assets in buying and selling transactions. If it is considered as a medium of exchange, it is subject to the conditions of Bay' Sarf and the trading of ribawi items. As long as there are no prohibited activities or elements included in arbitrage trading, we believe it is permissible and valid in terms of buying and selling, based on the default ruling and the mentioned principles.
It is also important to consider the fiqhiyyah rule that states:
"The fundamental requirement in every contract is justice."
Therefore, if an arbitrage trading transaction involves any injustice towards any party involved in the contract, it may raise issues from a Shariah perspective.
Conclusion
In summary, we believe that arbitrage trading does not contradict Shariah and is permissible as long as there are no prohibited elements or activities involved. However, if there is any injustice or unfairness towards any party in the contract, it may raise concerns from a Shariah perspective.