What is cryptocurrency arbitrage?Arbitrage is another way to describe the process of buying an item for cheaper abroad, importing it and selling it at a reduced price. The same concept applies to cryptocurrency arbitrage.
If you have a cryptocurrency app on your phone like Blockfolio for example, you will notice the price difference between Bitcoin on international exchanges and local exchanges. On most days there is a price difference of about $500 on Bitcoin between international and local exchanges.
This presents a unique opportunity to South Africans to buy Bitcoin or any cryptocurrency for that matter, on an international exchange and simply transfer it to a South African exchange like AltCoinTrader to sell for a profit. If the market remains stable and volume is good, one can expect to make profits in the area of 5%.
How does it work?According to the South African law, every South African may transfer or take R1 million abroad per annum. This can be done without the approval of the South African Reserve Bank (SARB) and without a tax clearance certificate. This is called the annual Single Discretionary Allowance (SDA).
This means that you can take R1 million out of South Africa to buy dollars, for example in order to buy Bitcoin on an international exchange. Please note that you do not have to take R1 million to the dot abroad and can do so in in cremations of R300 000 for example.
Once you have bought Bitcoin on an international exchange, you can withdraw your Bitcoin to a South African exchange like AltCoinTrader where the price of Bitcoin is higher and sell. In essence, you are creating a loop structure.
What to watch out forCryptocurrencies overall are very volatile. Price fluctuations can be hard and fast. Watch out for potential bear markets and bear traps. Therefore, it is advisable to sell your Bitcoin as soon as it reflects in your AltCoinTrader account in order to secure profits.
Be mindful of transaction and withdrawal fees. Visit the fees structure page on the exchange you will be making use of to see how much they charge for deposits, transaction and withdrawal fees. You need to deduct this from your profits.
In order to take money out of the country, you need a South African ID and tax income number. The entity that performs your Forex transaction is legally obliged to give your information to the SARB and the South African Revenue Service (SARS). Depending on which tax bracket you fall under, you may be liable to pay taxes on monies earned during cryptocurrency arbitrage, should you deposit these funds into a South African bank account.
Cryptocurrency arbitrage is a great way to earn additional income but be sure to consult with a financial advisor before embarking on this venture.