Comment by greenleafjacob

Others here are missing the point. Until platforms like Bitfinex allowed margin trading, arbitrage was impossible because the exchanges are extremely risk averse. In order to arbitrage you would have had to buy on one exchange, then wait for 3 confirmations (~40 minutes?) before the receiving exchange would take the risk that the bitcoin was actually transferred. Now with short selling it looks like you can instantly borrow a bitcoin on the exchange that's inflated, then sell it immediately. You don't need to transfer between exchanges - all done completely on internal paper transfers inside the exchange.