Why crypto arbitrage is more popular than ever

You can also listen to this podcast on iono.fm here.

South Africans discovered crypto arbitrage several years ago as a relatively low-risk way of making a return from differences in crypto prices between South Africa and overseas exchanges.

This is one of the great gifts of currency controls – crypto can be bought on overseas exchanges, then sold locally for a profit.

It was something of a cottage industry for many years as people figured out how to get funds out of the country to purchase bitcoin and then ‘ship’ them back to South Africa.

It’s since become far more streamlined, with several companies now offering to take care of the logistics and regulatory hurdles. And those regulatory hurdles have increased quite substantially in the last few years. We haven’t heard much about crypto arbitrage for a while, so we thought it was about time to check in on it and see if it’s still going and if it’s still profitable.

In this podcast, David Farelo, CEO and founder of Currency Hub, explains how crypto arbitrage has grown in leaps and bounds, despite the arbitrage premium falling to between 1.3% and 1.5% – down from 4-6% several years ago.

What’s changed in recent years is the popularity of crypto arbitrage among high-net-worth individuals and wealth managers looking for low-risk returns that beat the market.

South Africans with tax clearance from the South African Revenue Service (Sars) can use their foreign currency allowance of R11 million a year for crypto arbitrage. Farelo explains that they don’t need R11 million to participate – the minimum required is R100 000.

The crypto licensing regime introduced by the Financial Sector Conduct Authority (FSCA) has given legitimacy and credibility to the arbitrage trade, which has now become a popular (if unconventional) method of boosting investment returns.

Be sure to tune in to this fascinating podcast to have your questions around how crypto arbitrage works and whether this is right for you answered.

For previous Moneyweb Crypto Pod episodes, click here.

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