[JumpCrisscross]

Venue (space) arbitrage in illiquid, disconnected markets necessitates holding collateral at each venue. In this case, it means holding USD and BTC at both Coinbase and MtGox (presuming you don't know, in advance, which way the arbitrage will open up). If one can fund accounts instantly USD and BTC can be held in outside accounts, waiting. When opportunity arises one simultaneously sells in one location and buys in the other. Aggregate USD held to BTC held doesn't change, but quantities held slowly appreciate.

A challenge with a volatile pair like BTC-USD is keeping the portfolio delta hedged, i.e. neutral with regards to movements in BTC-USD. Without the ability to even borrow BTC effectively this becomes difficult to do cost-effectively. That said, a volatile pair in a fragmented market allows for market making sans leverage.

Taking a space arbitrage, as the author presented, and executing it as a space-time trade, as the author presented (buying in one place, waiting, selling in another), is not arbitrage.

[larsonf]

Technically, sure. But 'arbitrage' today is interpreted broadly--more along the lines of buying basically the same thing and making the difference at some point in the future. Like stat arbitrage. Merger arbitrage. Capital structure arbitrage. There is an amount of non-simulataneaity in all of these. Buy two of what ought to be the same price, but are not for some reason, and wait. Sameness and waiting. I mean, shoot, in stat arb the entire thing is based on such a murky idea of sameness that two products/instruments/securities might not actually even be the same thing and may never converge. So point being, in the vernacular, yes, 100% what the author is talking about is in fact 'arbitrage.'

[arantius]

The words you're using make it sound very much like you know what you're talking about. And it sounds interesting. But I can only make sense of bits of it. Do you have a good suggestion where I can read a bit more about this?

I.E. Why is the space vs. space-time distinction important? Why is borrowing BTC important? You give an "i.e." but I still don't understand delta hedged.