There’s no question that crypto arbitrage has become a popular alternative investment for thousands of South Africans looking to beat the market.
Future Forex has taken crypto arbitrage a step further by unveiling a new dashboard that gives clients a detailed and up-to-date view of their trading history, their account balance, current market conditions, and how much of their foreign exchange allowances have been utilised.
“We launched this new dashboard to give clients greater transparency into how we are trading on their behalf, the current market conditions, and to ensure that they have full visibility on how their investment is performing,” says Future Forex CEO and qualified actuary Harry Scherzer. “This is the result of months of hard work and surveying clients to see what level of information they wanted. Clients appreciate that our service is completely hands-off, but they want to be able to monitor as close to real time as possible, our performance, general market trends, and how much foreign exchange allowances they have remaining for the year.”
The graph below shows how Future Forex clients have performed over the last year. Assuming one trade per week, a starting investment of R200 000 was worth R362 700 a year later, a gain of 81%. Compare that with direct exposure to bitcoin (BTC), which is down by roughly half since September 2021. The JSE is up around 5% over the same period and the S&P 500 less than 4%.
While it’s important to note that historical profits are no guarantee of future profits, what’s noteworthy about the chart below is the smoothness of the gain. Scherzer says that’s because there was not a single losing trade throughout the period.
“The reason that there are no losses is because we hedge all our trades, which means we will not expose our clients to potential loss. We are fully hedged in terms of foreign currency and crypto price risk. Effectively, this means we are able to lock in the profit at the start of the trade, not the end of the trade. If you were to undertake crypto arbitrage on your own, you would be exposed to possible forex and crypto price risks while the trade is underway, and that can often wipe out any expected profits. We have been able to eliminate those market risks entirely,” says Scherzer.
Under current market conditions, clients can expect to make between 0.7% and 1.3% net of fees per trade, which – though far lower than the typical arbitrage spread of 3-5% a few years ago – is still highly attractive.
“The current arbitrage conditions allow for returns which are still far more lucrative than any investment opportunity with a similarly low risk profile,” adds Scherzer.
Costs are aligned to customer profits
Future Forex is able to switch between arbitraging USDC (a US dollar-backed stablecoin) and BTC, depending on which offers the widest profit margin. This allows the company to grab whichever crypto asset offers the widest premium.
The company is also able to take advantage of monetary spikes in the crypto arbitrage premium.
“For example, in the past we have seen instances when the arbitrage spread widens briefly and then narrows again a few seconds later,” says Scherzer. “We are able to grab these momentary spikes on behalf of clients, because our trading team is monitoring these spreads throughout the day.”
Future Forex earns its profits only when the client makes money, through a sliding scale that starts at 25% of profits, depending on how much is invested. Scherzer says the minimum to start crypto arbitrage trading with Future Forex is R100 000, though profits increase significantly if the starting amount is R200 000 or more, because that means fewer trades and therefore less charges. There are no management or other fees charged. Future Forex’s team also perform all of the paperwork regarding applying for foreign exchange allowances on your behalf, at no extra cost.
Will crypto arbitrage ever disappear?
The crypto arbitrage opportunity available to South Africans is a function of exchange controls. Because South Africans have limited access to assets priced in international currencies such as the US dollar, that makes those assets more expensive in SA. Just how expensive changes from day to day, and sometimes disappears altogether, depending on the demand for BTC or USDC.
As more and more people have started to take advantage of crypto arbitrage opportunities, this has lowered the premium at which crypto assets such as BTC and USDC trade. This begs the question: will crypto arbitrage ever disappear completely?
“This opportunity may not be available forever, so it’s worth getting on board while it’s still around,” says Scherzer.
“Historically, we’ve seen the arbitrage spread narrow as more people enter the market. It’s likely that the arbitrage spread will continue to narrow over time, and may eventually disappear, but even in those circumstances we should expect to see the spread re-emerge from time to time as special situations arise, such as a knock to the rand, or some local event that would cause the local price of crypto assets to fall out of alignment with those same assets overseas.”
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