You can't do arbitrage if you can't get your dollars out. If you buy Bitcoins for $100 and sell them on Mt. Gox for $120, you're making money on paper but you can't necessarily get your earnings out into your bank account. You'd quickly run out of capital, and in the end you might have your dollars seized.
There is a crazy opportunity. But it comes with risk. Risk that it may take months for you to eventually withdraw the dollars from MtGox to your bank account (wire transfers are executed at a glacial pace as reported by users). By that time, who knows what the BTC exchange rate will be. It may not be possible anymore to then buy BTC at $100 on other exchanges.
The last withdrawal I executed from MtGox (1000 EUR in April) took 3 months to be done (saw the money hit my bank account in July). MtGox was apologetic in support ticket I filed, but did not explain why it took so long other than they had "issues".
> MtGox was apologetic in support ticket I filed, but did not explain why it took so long other than they had "issues".
Elsewhere MtGox employees have explained that their bank has limited them to 10 international wire transfers per day due to capacity issues - they claim at one point they were responsible for 50% of the international wire transfers of their bank, the second largest in Japan. Apparently international wire transfers aren't very popular in Japans o they're all processed manually, which doesn't scale to what MtGox are doing.
> By that time, who knows what the BTC exchange rate will be.
This isn't relevant if you do the following:
1) Transfer USD to Bitstamp from your bank account
2) Buy BTC with your USD on Bitstamp
3) Transfer BTC to Mt. Gox
4) Sell BTC for either EUR or USD on Mt. Gox
5) Transfer EUR/USD to your bank account
In this scenario you are only exposed to exchange rate risk from the time it takes you to transfer BTC from Bitstamp to Mt. Gox and sell it (I think Mt. Gox requires 6 confirmations, so that's - on average - less than an hour currently).
As I see it the largest risk is Mt. Gox defaulting on its USD or EUR obligations, in which case you'll lose everything.
The opposite. Let's say you convert USD to BTC at ~$100 at BitStamp, move the BTC to Gox and sell it at ~$120 USD. You made a 20% profit on paper, but now you have USD that you can't withdraw any time soon, possibly ever.