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When David Farelo (COO at CURRENCY HUB) and some friends came across the cryptocurrency arbitrage trade in 2017, the Premium was at times generating 30% per trade. Since going mainstream, this figure has reduced to between 1% and 3%, characteristic of an arbitrage opportunity as more people pile into the trade. Yet, this still has the potential of delivering an ultra-low, risk-adjusted return of 30% when trading R250k over a few months. This can equate to R100k profits for the client in a tried and tested strategy, recognised by the regulator.
“It’s the safest crypto trade out there, the client is never exposed to any cryptocurrency price nor FX movements. It’s also a great opportunity to incorporate existing investments to optimise your households cash flow to perform the arbitrage” says David Farelo.
The arbitrage opportunity exists due to exchange-control laws in South Africa, limiting tax compliant individuals to send out R1 million as part of their single discretionary allowance (SDA), and then a further R10 million as part of the foreign investment allowance (FIA). CURRENCY HUB delivers a 1-stop solution, trading on behalf of their clients, essentially looping the R250k over 44 trades in as many days when trading optimally to complete the R11m allowance. The duration of the trading cycle can extend, subject to the amount of money you have available for the FIA application at SARS.
CURRENCY HUB is one of several crypto-arbitrage players in the market, but many are having to shut their doors as they are unable to deliver net returns of 1% per day for their clients under the current low -Premium conditions.
“Given the current low Premium environment we now offer a FREE arbitrage trading solution when the Gross Premium is between 1.5% – 2%, and simply charge a competitive fee for processing the foreign exchange payments” says David Farelo.
CURRENCY HUB is unique relative to the rest for the following reasons. Firstly, CURRENCY HUB’s set of companies are FSCA regulated financial services providers, managing part of the arbitrage service that fits within the traditional financial services sector, such as the actual booking of forex for our clients.
Second, CURRENCY HUB is a SARB approved forex intermediary, which facilitates the clients’ outward forex payments to purchase the cryptocurrency offshore to perform the arbitrage. Having this licence brings a number of positives to the service, like being able to trade up to 3 times per day (unique to CURRENCY HUB) and being able to generate as much as 0.5% higher returns, while actively trading the forex markets.
Third, CURRENCY HUB has never incurred a single loss in 8000+ trades in over 5 years by simultaneously hedging the forex exposure and securing a Premium, thus ensuring their traders know exactly what profits the client will make before committing to the trade. That means that the daily moves in the Premium and or the rand/dollar never affects the client’s return, noting the clients are never exposed to Bitcoin nor the volatility of the crypto markets. This makes CURRENCY HUB a pure crypto-arbitrage service provider.
Lastly, the client only has to speak to CURRENCY HUB, not multiple service providers throughout the supply chain. Clients are onboarded once, the FICA process is done online in less than 10 minutes, while trading and bank accounts are set on behalf of the client. All the FIA applications and correspondence with SARS is managed in-house by a professional team who are able to speed up the process.
People are naturally sceptical about crypto given the volatility and the scams that are out there, so let’s debunk some of the risk to the arbitrage trade and using CURRENCY HUB as a service provider.
The first one is counterparty risk. The CURRENCY HUB service is integrated with their authorised dealers (Mercantile and Investec) for processing the foreign exchange on behalf of the client. Other hybrid counterparty risk considers the exchanges and OTC (over the counter), where one converts crypto to Rands to perform the arbitrage. CURRENCY HUB has long-standing relationships with best of breed services providers who support this function.
The second one would be price risk. CURRENCY HUB deals with predominantly with stablecoins and not the volatile Bitcoin or Ethereum currencies, therefore mitigating the price risk. CURRENCY HUB has institutional relationships and credit lines with various OTC desks and exchanges ensuring the profits are clearly visible before any trading commences.
Another risk is the forex risk. That’s your rand/dollar exchange rate or rand/euro exchange rate, depending on what forex you purchase. That’s a risk, but they mitigate that by providing the client with a hedge solution, guaranteeing the forex rate.
In summary, the arbitrage is still very much alive and even under the current market conditions with a premium of around 2% gross, the efficient trading cycle and active trading strategy developed by CURRENCY HUB is capable of delivering a R100k in a few months. The risks are extremely low and make better use of existing investments to trade up to R10m of your FIA. Household returns can even be doubled using an interspousal loan.
For more information on the FREE arbitrage service being offered by CURRENCY HUB, please refer to https://www.currencyhub.co.za/ and contact one of their specialists. Please be advised that cryptocurrencies remain unregulated and past returns do not guarantee future performance.
- The crypto arbitrage strategy explained – CURRENCY HUB
- Cryptocurrencies and digital assets and how they rely on blockchain technology
- How Bitcoin differs from other digital assets like Ethereum
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