Until cryptocurrency exchanges came along, long-term and profitable arbitrage strategies were all but dead.
Arbitrage means buying something for one price in one market and then selling it at a higher price in a different market, usually within a short time frame.
For example, if stock XYZ is trading at US$10 at the New York Stock Exchange but trades at $10.05 on the London Stock Exchange, a trader could achieve a relatively low-risk profit by buying up stock XYZ on the NYSE and immediately selling it on the LSE. This would keep happening until the NYSE either ran out of stock XYZ or the two exchanges balanced their prices so that there was no longer a difference.
More often than not, exchanges balance out their prices. However, cryptocurrency exchanges offer a unique opportunity.
Lots of opportunities for arbitrage
The dizzying number of cryptocurrency exchanges (7 800 in December 2020, according to this article) means that opportunities for making a profit with arbitrage are widespread. As a lone investor, one of the major hurdles is finding those arbitrage opportunities. Another hurdle is knowing which exchange to trust.
As blockchains grow in popularity, more and more “ready-to-use” code becomes available so that eventually anybody and their grandmother could theoretically start an exchange.
That’s not a good thing. Smart-contract bugs can result in millions of dollars literally vanishing. That’s why regulation in the crypto space is so vital. More and more jurisdictions are starting to regulate crypto money to ensure that people’s assets are secure.
These two major barriers to arbitrage on an individual level — difficulty in finding opportunities and not knowing which exchanges are trustworthy — are precisely why top-level, trustworthy cryptocurrency exchanges like Ovex are able to offer prime arbitrage services to serious private investors and institutions.
Unique opportunity to provide arbitrage
Ovex was formed in 2017 and is now valued at more than R2-billion. It serves primarily high-net worth individuals — people with a liquid net worth of $1-million or more — and so it must perforce conduct its affairs with the highest standards.
The company has built up a core of expert blockchain programmers and has discovered several ingenious methods that can deliver guaranteed profits to its investors. One such method is capitalising on the difference in cryptocurrency prices between South African and foreign markets.
Historically, South African exchanges have tended to lag foreign ones on the price of cryptocurrency. In the past four years, the foreign BTC/ZAR price has traded at an average 4.6% premium over BTC/USD. By purchasing bitcoin through its UK office, and then selling it instantaneously in the South African market, Ovex is able to deliver consistent returns to its arbitrage clients.
The arbitrage gap between foreign and local markets has sometimes gone as high as 15%. But Ovex takes it a step further, charging a minuscule spread of only 1%, or even lower if the spread happens to fall short of 1%. Capital is always guaranteed.
South Africans are currently in a unique position to profit from this arbitrage opportunity. As infrastructure is implemented, the lag in crypto prices that has traditionally existed cannot be guaranteed to last. And, whereas companies like Ovex will continue to find ways to deliver returns to their enormous investors despite changes in the market, the incredibly low-risk, high-gain arbitrage opportunity which exists right now is one that investors will want to seize quickly.
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