Cryptocurrency arbitrage is making South Africans millions of rand, as many investors are well aware of the great returns available using this form of investment.
If you’ve never heard of cryptocurrency arbitrage, however, or would like to understand how it works, we have answered the most common questions about it below.
What is cryptocurrency arbitrage?
Cryptocurrency arbitrage is a form of investment which involves buying cryptocurrency at lower prices on cheaper markets, and selling it at higher prices on more expensive markets.
For example: over the past four years, South African Bitcoin markets have traded at an average premium of 4.6% compared to US Bitcoin markets.
By leveraging this difference, you can make quick profits.
How does cryptocurrency arbitrage work?
The primary concept behind arbitrage is very simple.
If you went to a market in Cape Town and bought a bag of oranges for R100, and then found a second market in Johannesburg where you sold the bag of oranges for R120, you make R20.
The same concept applies to Bitcoin, and by leveraging the gap between the price of buying Bitcoin in South Africa and buying it on US markets, you can make quick money.
What risks come with cryptocurrency arbitrage?
The biggest risk that cryptocurrency arbitrage brings is if between purchasing and selling your cryptocurrency, the value changes significantly.
This could result in your profits reducing significantly, or you could even incur a loss.
Fortunately, leading cryptocurrency arbitrage platforms like OVEX can negate this risk by offering instant trading – which means the prices you see are the prices you get.
What regulations affect cryptocurrency arbitrage?
As cryptocurrency arbitrage involves trading on overseas markets, you will need to use the allowances provided to South Africans who wish to invest internationally.
The first is your Single Discretionary Allowance, which allows you to invest up to R1 million overseas, and is available to all South Africans over the age of 18.
If you wish to invest more money than this, you will have to apply for a Foreign Tax Clearance Certificate (FTCC), which lets you access your R10 million Foreign Investment Allowance (FIA).
This amounts to a R11 million limit you can invest into cryptocurrency arbitrage per calendar year.
Invest with OVEX
If you’d like to start your cryptocurrency arbitrage journey, OVEX is the best platform to use.
They offer low fees, instant trading, and an intuitive platform.