You dont have a risk of divergence loss if you're simultaneously buying and selling the same product in the same order book.
Bid/ask spreads were as wide as double or triple digits during the liquidation event. At this point the only limit to riskless profits is your liquidity and the speed at which you can execute.
Market makers can't just conjure up a counterparty. The spread widens because lack a liquidity increases directional risk. If it were truly riskless, others would jump in to close the spread.
This is exactly what market makers do. During violent moves prices vary wildly between exchanges and market makers become takers. They instantly buy and sell the same amounts on different exchanges without risk, then re-balance their accounts.
No. To buy and sell on your own schedule, you must take liquidity, paying the spread. This is not what market makers do, they sell liquidity. And it becomes less possible to find efficient clearing trades during rapid moves, because the spread widens exactly because market makers don't want others to arbitrage them.
> you're simultaneously buying and selling the same product in the same order book.
How's that even possible? Suppose the bid is at $95, the ask is at $105, and you receive a buy order for $100, you can't "simultaneously" sell that and make a profit.
