[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.