When David Farelo (CIO at CURRENCY HUB) and some friends came across the cryptocurrency arbitrage trade in 2017, the Premium was at times generating 30% per trade. Since going mainstream, this figure has reduced to between 1.5% and 3%, characteristic of an arbitrage opportunity as more people pile into the trade. Yet, this still has the potential of delivering an ultra-low, risk-adjusted return of 40% when trading R250k over a few months. This can equate to over R100,000 profit for the client in an established arbitrage strategy, recognised by the regulator.
The client is not locked into the trade for the entire term cycle and can withdraw their funds at any time.
“It’s the safest crypto trade opportunity in the market, the client is never exposed to any cryptocurrency price nor Forex movements. It is a PURE arbitrage service. It’s also a great opportunity to incorporate existing investments to optimise your households cash flow to perform the arbitrage” says David Farelo.
The arbitrage opportunity exists due to exchange-control laws in South Africa, limiting tax compliant individuals to send out R1 million as part of their single discretionary allowance (SDA), and then a further R10 million as part of the foreign investment allowance (FIA). CURRENCY HUB delivers a 1-stop solution, trading on behalf of their clients, essentially looping the R250k over 44 trades in as many days when trading optimally to complete the R11m allowance. The duration of the trading cycle can extend, subject to the amount of money you have available for the FIA application at SARS.
CURRENCY HUB is one of several crypto-arbitrage players in the market, but many are having to shut their doors as they are unable to deliver net returns of 1% per day for their clients under the current low -Premium conditions & due to them not having the relevant FSP license(s) for the services that fall within our traditional Financial Services.
“Given the current low-Premium environment we now offer a FREE arbitrage trading solution when the Gross Premium is between 1% – 2%, and simply charge a competitive Forex fee for processing the foreign exchange outward payments” says David Farelo.
CURRENCY HUB is unique relative to the rest for the following reasons. Firstly, CURRENCY HUB’s set of companies are FSCA regulated financial services providers, managing part of the arbitrage service that fits within the traditional financial services sector, such as the actual booking of forex for our clients, which includes the decision on when to buy the Forex for clients.
Second, CURRENCY HUB is a SARB approved forex intermediary, which facilitates the clients’ outward forex payments to purchase the cryptocurrency offshore to perform the arbitrage. Having this licence brings a number of positives to the service, like being able to trade up to 3 times per day per client (unique to CURRENCY HUB) in the event that the premium increases.
Third, CURRENCY HUB has never incurred a single loss in 10,000+ trades in over 5 years by simultaneously hedging the forex exposure, thus ensuring their traders know exactly what profits the client will make before committing to the trade. That means that the daily moves in the Premium and or the rand/dollar never affects the client’s return, noting the clients are never exposed to Bitcoin nor the volatility of the crypto markets. This makes CURRENCY HUB a pure crypto-arbitrage service provider.
Fourth, CURRENCY HUB has in-house accountants who facilitate our client’s Foreign Investment Applications (FIA) removing the admin from the client, liaising with SARS and optimising the process to ensure the fastest FIA approval turnaround time for our clients. Client’s with FIA experience are also more than welcome to do this themselves and provide CURRENCY HUB with the Tax Clearance Certificates once SARS approves them.
Lastly, the client only has to speak to CURRENCY HUB, not multiple service providers throughout the supply chain. Clients are on-boarded once, the FICA process is done online in less than 10 minutes, while trading and bank accounts are set on behalf of the client. All the FIA applications and correspondence with SARS is managed in-house by a professional team who are able to speed up the process.
People are naturally sceptical about crypto given the volatility and the scams that are out there, so let’s debunk some of the risk to the arbitrage trade and using CURRENCY HUB as a service provider.
The first one is counterparty risk. The CURRENCY HUB service is integrated with their authorised dealers (Mercantile and Investec) for processing the foreign exchange on behalf of the client. Other hybrid counterparty risk considers the exchanges and OTC (over the counter), where one converts crypto to Rands to perform the arbitrage. CURRENCY HUB has long-standing relationships with best of breed services providers who support this function.
The second one would be price risk. CURRENCY HUB deals predominantly with stablecoins and not the volatile Bitcoin or Ethereum cryptocurrencies, therefore mitigating the price risk. CURRENCY HUB has institutional relationships and credit lines with various OTC desks and exchanges ensuring the profits are clearly visible before any trading commences.
Another risk is the forex risk. That’s your rand/dollar exchange rate or rand/euro exchange rate, depending on what forex you purchase. That’s a risk, but they mitigate that by providing the client with a hedge solution, guaranteeing the forex rate.
In summary, the arbitrage is still very much alive and even under the current market conditions with a gross premium of around 2%, the efficient trading cycle and active trading strategy developed by CURRENCY HUB is capable of delivering a R110k in a few months. The risks are extremely low and make better use of existing investments to trade up to R10m of your FIA. ***Household returns can even be doubled using a spousal loan thereby doubling your profit while using the same Trading Capital (e.g. R250,000).
Contact CURRENCY HUB’s arbitrage specialists on https://www.currencyhub.co.za/.