The past few months have been terrible for cryptos, with Bitcoin (BTC) down 60% from its November 2021 peak above $67,000.

It was even more horrifying for altcoins such as Ethereum (ETH), down almost 70% over the same period.

It’s a story repeated across crypto charts, compounded by the collapse of the Terra/Luna ecosystem, which wiped out an estimated $40 billion in value.

One corner of the crypto space that has continued to shine through all of this turmoil is crypto arbitrage, which has lived up to its reputation as a relative haven in times of trouble.

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

“Arbitrage is a relatively safe way for people to profit from the crypto space, without being exposed to the massive volatility we’ve seen over the past few months,” says Harry Scherzer, qualified actuary and CEO of the specialist e-commerce provider. Future Forex crypto arbitrage, a licensed PSF for currency transfer services.

The following chart illustrates how the arbitrage market has compared to traditional investments as well as direct investments in Bitcoin over the past 18 months. The blue line shows returns from Future Forex crypto arbitrage, which has provided consistent returns and relatively low risk for clients.

Source: Future Forex

“Crypto arbitrage has historically generated a net profit of 1% to 2% per trade, whether crypto prices are high or low,” Scherzer says.

This is reflected in the chart below, showing net profit (yellow line) and gross profit (blue line) from crypto arbitrage over the past two years. The profit margin has fallen from 3%-4% to an average of 1%-2% per trade over the past two years, but is still very attractive for those who want to profit from cryptos in a way that does not expose them to market risk.

Source: Future Forex

Future Forex is able to arbitrate using BTC and the USDC stablecoin, which is a crypto version of the US dollar. Scherzer says the benefit of being able to switch between USDC and BTC is the ability to maximize profits.

“There are times when the profit margin on USDC is higher, and there are times when BTC is more profitable, so we are able to switch between the two to maximize returns for clients.”

Cover the risks

Future Forex has managed to hedge two of the main risks of crypto arbitrage – market risk (being exposed to BTC when the price is volatile) and exchange rate risk. Arbitrage involves the purchase of US dollars that must be shipped overseas to purchase crypto, which exposes the trader to movements in exchange rates. These market movements can often eliminate or reduce the profit on an arbitrage trade.

By executing trades immediately, Future Forex is able to hedge these risks, locking in profits at the start of the trade, rather than at the end. Clients trading through Future Forex are therefore not exposed to any market risk and benefit from the predictability of returns at the start of each trade.

A realistic expectation is a net profit of 1% to 1.5% per trade, which can add up to more than 100% per year, depending on the number of trades made during the year, Scherzer explains. Future Forex enjoys an average annualized return of over 80% per year for its clients. It has processed over R3.3 billion in transactions since its inception.

Arbitrage Using Foreign Currency Allocations

Crypto arbitrage uses the two foreign currency allowances available to South Africans – the Single Discretionary Allocation (SDA) of R1 million and the Foreign Investment Allowance (FIA) of R10 million per annum. That’s R11 million per year – and double that (R22 million) for a married couple – available for crypto arbitrage. Future Forex is also able to help clients apply for the FIA ​​free of charge, which is available to those with SA Revenue Service tax clearance.

The minimum required to trade is R100,000, although Scherzer claims that trading with R200,000 or more is preferable due to economies of scale, which means the percentage profits will be considerably higher the greater the capital for trade is important.

With a starting capital of R200,000, R11 million in foreign currency for arbitrage and a realistic profit target of 1% to 1.5% per trade, clients can expect to earn R110,000 to 165 000 rand per year.

The process is fully automated once customers are onboarded. Future Forex allows clients to designate their desired profit target, although this should be kept within reason. “There are days when the price gap can be as high as 4%, but that’s not something that happens often, so we advise clients to be realistic in their profit expectations,” says Scherzer. .

Costs

Future Forex does not charge any management fees and instead shares the profits made. There are no hidden fees or costs. This profit-sharing model means that the interests of customers are aligned with those of the company. You can register here.

Future Forex’s Harry Scherzer will speak at the Better Investor Conference next week. You can find him on Day 1 in Session 7 at 1:30 p.m., hosted by Ciaran Ryan. You can register for the conference for free here.

Presented by Forex future.

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