[SPONSORED] 'No, [crypto arbitrage] is not dying – it’s most certainly here and it’s alive.' Moneyweb bitcoin CURRENCYHUB
CIARAN RYAN: Crypto arbitrage has become a huge business in South Africa. Companies like CURRENCY HUB were set up to help South Africans buy cryptos like Bitcoin at a discount on overseas exchanges, and sell them in South Africa at a profit. That’s exactly what arbitrage is – buying cheap in one market and selling it at a higher price in another.
DAVID FARELO: Ciaran, the simple answer to that is no, it’s not dying – it’s most certainly here and it’s alive. We can actually go back to December/November where we saw the premium around 1% to 1.5%, and that was the lowest we saw it all year.
Third, the client only has to speak to CURRENCY HUB, not multiple service providers throughout the supply chain. We are also, like you mentioned earlier, able to trade up to three times a day. Now this is unique in the market and it allows us to basically lock in arbitrage trades when we see a spike in the premium momentarily throughout the day. That’s huge for us and our clients.
DAVID FARELO: That’s correct. That actually happened over the weekend. Remember, [over] the weekend the forex market is closed so you can’t trade traditional forex, and therefore you can’t lock in the forex on weekends. But if that happens during the week, we most certainly can. It did widen up a little bit in January, so maybe just explain: is that because [of] the allocations that people have on the single discretionary allowance, the R1 million per year that expires every December 31 and you get a new allocation come January 1. So, people have more time and they’re not trying to race to use up their allocation. Is that correct?
CIARAN RYAN: I know that some of your competitors are saying that you can make R300 000 per year in crypto arbitrage. That is if you arbitrage your full allocation of R11 million rand per year. I know you have a problem with this claim – that profit of R300 000. What are realistic expectations for people getting into this market?
DAVID FARELO: The main reason for the arbitrage opportunities in South Africa is our exchange control laws. Basically, that enables what we spoke about earlier: the single discretionary allowance and the foreign investment allowance caps individuals at R11 million per calendar year that you can take offshore. Therefore, there’s a supply/demand constraint in terms of liquidity in South Africa for crypto.
So, I think it’s just a smart move in terms of reallocating resources because, even though arbitrage on a high level looks very simple, underneath it there are a lot of resources that must go into it. So, it’s resource intensive. They’re just reallocating those resources to their primary, core business.
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