How to earn R200k or more per year in crypto arbitrage
Considering the fabulous gains of cryptocurrencies such as Bitcoin and Ethereum over the past year (900% to 1400%), it should come as no surprise that earning 100% per year relatively risk-free is also possible in cryptos.
Welcome to the world of crypto arbitrage.
Tax-abiding South Africans can use their offshore allowance of R11 million per year (discretionary allowance of R 1 million and foreign investment allowance of R10 million per year) to generate a return of 2 % to 4% per year in crypto arbitrage. You don’t need R11 million to participate. A good starting amount is 100,000 Rand, or even as low as 50,000 Rand, although the returns are lower.
The problem with bitcoin and other cryptos is their volatility. You can expect periodic drawdowns of 30% to 50%, which is enough to scare many investors unaccustomed to this kind of market boost.
Buy low, sell high principle
Arbitrage consists of taking advantage of differences in the price of the same asset in different markets, for example bitcoin.
You can buy bitcoin on overseas exchanges, ship it electronically to a South African exchange, and sell it for a profit of 2% to 4%.
Investors in countries with foreign exchange controls – like SA – can expect to pay more for internationally traded assets due to the limited supply of hard currencies like the US dollar or the euro. This is how arbitrage opportunities present themselves. Nigerians, by comparison, pay a premium of up to 60% for their bitcoin due to the difficulty in accessing hard currencies.
There was a time in 2017 when the South African arbitrage spread (the price difference between foreign and local exchanges) for bitcoin went up to 30%, but typically ranged between 5% and 15%. Making money with this kind of opportunity was like shooting fish in a barrel.
This gap has narrowed since then, but it is still fairly constant at 2% to 4%. The problem with this type of arbitrage is that it is technically difficult for most people, as there are a number of moving parts that need to be walked through: buying currencies, shipping them overseas to a stock exchange. abroad where you have an account, buy cryptocurrencies on the foreign exchange, sending it back to SA (at the correct “address”) and then selling it on a local exchange for a profit.
Crypto firm Ovex was formed over three years ago to simplify the process of crypto arbitrage.
Rather than buying bitcoin on a foreign exchange and sending it to SA, Ovex trades using a stablecoin called Trust USD (TUSD), which is backed 1: 1 by the US dollar.
In effect, you buy US dollars overseas, ship them to South Africa, and sell them locally for a 2% to 4% profit.
Ovex handles all the logistics of arbitrage for its clients, but goes one step further to eliminate some of the risk that could wipe out profits. For example, if the price of crypto goes down while on the way from a foreign exchange to SA, your crypto profit may disappear or even become negative.
Instant transactions mean there is no risk
Ovex eliminates this risk by using its financial resources to lock in arbitrage profits at the time the client instructs to proceed with an arbitrage trade. This means that there is no possibility of slippage due to delays.
“We chose the TUSD over other cryptocurrencies for arbitrage purposes because it allows for completely risk-free trading,” says Jon Ovadia, Founder and CEO of Ovex.
He explains: “When the client buys USD from his bank to send abroad, he can – at the same time exactly – sell TUSD for a profit via the Ovex OTC. [Over-The-Counter] desk, which will extend a line of credit to the customer. “
TUSD is issued by Trust Token, a stable platform based in San Francisco with a market capitalization of nearly $ 350 million.
Ovex is backed by Invictus Capital, which manages around $ 150 million in crypto assets. Ovex recently closed a strategic investment round valuing the group at over R 1 billion, according to Alameda Research, a Hong Kong-based company with more than $ 3 billion under management and with the world’s fourth largest crypto derivatives exchange. , FTX.
Not a new concept
“We are often asked, is it really possible to make 200,000 rand per year by doing crypto arbitrage?” said Ovadia.
“The reality is that arbitration has been going on for centuries.
“If you bought oranges from Polokwane for R100 and sold them to Joburg for R120, that’s a simple form of arbitrage.”
He adds, “What’s new about what we’re doing is that we’re using crypto, and we’re doing it with a lot more speed and, I would say, with a lot less risk.
“Cryptos are notoriously volatile and many people feel uncomfortable with the fierce swings in crypto asset prices – even though it has worked to their advantage over the past year or so. But there have been many years when crypto prices have fallen dramatically. Bitcoin fell 84% after peaking in December 2017.
“Crypto arbitrage is a much safer and less volatile way to participate in this market, while achieving excellent returns.
Free investment allocation requests
There is another crucial benefit to doing arbitration through Ovex: you need a tax clearance certificate from the SA Revenue Service (Sars) to access your foreign investment allowance of R 10 million per year (and not at your discretionary allowance of millions of rand), and this usually requires a tax professional. or accountant to apply on your behalf. It can cost around R2,000 just for the app.
If you were to arbitrate R10 million in a single lot, this cost would not be prohibitive, but if you reinvest an amount of R100,000 for example for each arbitrage cycle, a request would have to be made each time.
That would mean 50 requests to R2,000 at a time, or R100,000 going to the accountant.
Ovex has engaged with a team of tax specialists to do this on your behalf at no cost.
“In fact, we cover the cost of the first application on your behalf and we have systems in place to automate all subsequent requests for foreign investment allowance,” says Ovadia.
“This means you don’t pay anything for Sars applications – we cover all of those costs.”
What the numbers say
Last month, Ovex traded over R4 billion at its OTC office in South Africa and is growing rapidly.
Earning R200,000 per year or more through crypto arbitrage is routinely done by hundreds of Ovex customers, explains Ovadia.
“South Africans are realizing the potential that exists in crypto arbitrage, and we have done everything possible to reduce or eliminate the risk and make it as accessible as possible.
All our customers need to do is register and the rest is taken care of for them.
If the client wishes to become more actively involved, he can always use the Ovex OTC desk for his arbitrage, although the minimum [investments] are higher. “
You can sign up with Ovex or find out more here.
Presented by Ovex.