Crypto arbitrage offers a safe haven despite crypto woes

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Risk-averse investors can look to crypto arbitrage for low-risk market beating returns, while remaining unaffected by the recent drop in cryptocurrency value.

Cryptocurrencies have had a rough time of it recently, and you’d have been wise to steer well clear of any direct crypto investments. Bitcoin (BTC), always a volatile investment, has seen its value shrink by more than 70% over the past seven months. The Terra (LUNA) crash has also contributed to the idea that crypto is ‘dead’, and cryptocurrencies are out of favour with even the most risk-tolerant investor.

Against the background of crypto’s disfavour, crypto arbitrage has continued to be a safe haven for the discerning investor, making healthy returns for investors despite the industry as a whole performing poorly.

Crypto arbitrage involves the buying of cryptos such as BTC on overseas exchanges and selling them in South Africa at a higher price – usually 2% to 3% compared to what they sell for abroad.

“Arbitrage is a safe way for people to profit off a market inefficiency in the crypto space, without being exposed to the volatility of either currency fluctuations or direct crypto fluctuations,” says Harry Scherzer, qualified actuary and CEO of specialist crypto arbitrage provider Future Forex.

The below chart illustrates how the arbitrage market has compared to traditional investments as well as compared to direct investment in Bitcoin. Future Forex, an authorised Financial Services Provider (FSP 51884) for currency remittance services, has delivered higher and more consistent returns for their clients over the past 18 months.

“Crypto arbitrage has typically delivered a net profit of 1% to 1.5% per trade, regardless of whether crypto prices are high or low”, says Scherzer. Due to the cyclical nature of the process, multiple trades can be performed each year using the same capital. Through the process of trading multiple times, Future Forex boast an average annualised return of above 75% per annum for their clients after processing over R3.6 billion worth of trades.

Hedging the risks

Arbitrage can be risky due to crypto price fluctuations and currency movements. Sending money abroad to buy cryptocurrencies overseas takes several hours, during which the possibility of the currency price moving sharply is always a risk. Similarly, once purchasing the cryptocurrency abroad it can take more than an hour to transfer and sell locally, during which time the possibility of a decrease in crypto prices is a risk. Future Forex has however hedged out these risks by locking in the profits at the start of the trade. “A focal point for our team has been ensuring that the risk is minimised wherever possible. Our fully hedged system ensures that there are no market risks to investors as the profits are known at the outset of any trade”, says Scherzer. This ensures that service is price agnostic, meaning that you will still make money regardless of whether BTC doubles or halves in price while trading.

One remaining risk is that one of the counter-parties used by Future Forex does not fulfil their obligation while the trade is underway – a remote possibility, says Scherzer, given the deep due diligence performed on all its overseas and local partners. “Having eliminated the market risks entirely through our fully hedged investment system, we’ve spent a lot of time and effort selecting the best and most trusted partners for our crypto arbitrage service, to ensure that the risk of counter-party failure is extremely low. We have performed extensive due diligence on third parties, ensuring that they are credible and reliable before engaging with them in our arbitrage process.”

Utilising foreign investment allowances

Crypto arbitrage utilises the two foreign currency allowances available to South Africans – the R1 million-a-year Single Discretionary Allowance (SDA) and R10 million-a-year Foreign Investment Allowance (FIA). That’s R11 million a year – and double that (R22 million) for a married couple – available for crypto arbitrage. Future Forex is also able to assist clients in applying for the FIA free of charge, which is available to those who have tax clearance from SARS.

The minimum required to trade is R100 000, though Scherzer says trading with R200 000 or more is preferable due to economies of scale, meaning the percentage profits will be significantly higher the larger the capital for trading.

With R200 000 starting capital, R11 million in foreign currency allowances for arbitrage, and a realistic profit target of 1% to 1.5% per trade, clients can expect to make R110 000 – R165 000 a year.


Future Forex does not charge any management fees and rather shares in the profits earned. There are no hidden fees or costs. This profit-sharing model means clients’ interests are aligned with those of the company.

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