[hodder]

Which makes BTC purchased via exchange the Hotel California of Assets. You can check in any time you like but you can't ever leave.

Something is amiss here. Selling BTC to USD should be instantaneous even if cash withdrawal isn't no? Can you not look at the bid/ask and get executed at the bid on these exchanges?

I should be able to buy "cheaply quoted BTC" on Exchange A. Transfer to wallet at "higher quoted BTC" at exchange B, and executed a sale at the bid, even if I can't pull my USD into my actual bank account for a couple days.

[wcoenen]

Yes, if you have USD on an exchange, you can instantly buy bitcoin, and quickly move it to another exchange, and again instantly sell it there.

The problem is that after this sequence of events, your USD is at the exchange with the higher priced BTC, while you need it at the exchange with the lower priced BTC to repeat the process. This requires moving the USD back via the traditional banking system, which is slow. The bank wires are the bottleneck.

Crypto-Crypto trading pairs don't have this problem, which is why the ETH/BTC spread for example is much smaller. The spread there probably just reflects fees and custodial risks that put a slight break on arbitrage.