Understanding Crypto Arbitrage in South Africa
Cryptocurrency arbitrage is a popular investment strategy that involves buying and selling cryptocurrencies on different exchanges to take advantage of price differences. In South Africa, the crypto market has been growing rapidly, and crypto arbitrage has become an attractive option for investors looking to make profits.
If you are interested in signing up for arbitrage in South Africa, you can try our FiveWest Arbitrage Service which automates the process of doing the South African arbitrage.
Let’s take a closer look at what crypto arbitrage is and how it works in the context of South Africa.
What is Crypto Arbitrage in South Africa?
Crypto arbitrage is the process of buying and selling cryptocurrencies on different exchanges to take advantage of price differences. In other words, you buy a cryptocurrency on one exchange where the price is low and then sell it on another exchange where the price is high. The difference between the two prices is your profit, minus any fees or transaction costs.
In South Africa, crypto trades at a premium to international markets due to exchange controls. This creates an arbitrage opportunity for those who can buy the cryptocurrency offshore and sell it in South Africa.
How Does Crypto Arbitrage in South Africa Work?
Crypto arbitrage works by exploiting the inefficiencies of the crypto market. Prices for cryptocurrencies can vary widely between different exchanges due to factors such as supply and demand, trading volume, and liquidity. These price differences can be exploited through arbitrage, allowing traders to make a profit.
For example, let's say that Bitcoin is trading for $60,000 on one exchange and $61,000 on another exchange. If you buy Bitcoin for $60,000 on the first exchange and sell it for $61,000 on the second exchange, you would make a profit of $1,000, minus any fees or transaction costs.
Crypto arbitrage can be done manually or through the use of automated trading bots. Automated trading bots are software programs that are designed to scan the market for arbitrage opportunities and execute trades automatically.
Is crypto arbitrage legal in South Africa?
Yes crypto arbitrage is legal in South Africa. The South Africa Financial Sector Conduct Authority (FSCA) has declared that crypto assets are a financial product and individuals are free to use their foreign currency investment allowance towards crypto arbitrage.
Is crypto arbitrage in South Africa still profitable?
Absolutely. Take a look at the FiveWest Crypto Arbitrage Dashboard to see the current premiums. Historically these have traded as high as 3% but more recently they have been in the 1 - 2% range.
How is crypto arbitrage taxed in South Africa?
For crypto profits subject to Capital Gains Tax, individuals pay a maximum effective 18% tax rate, on gains in excess of the R40 000 annual exclusion, depending on their total taxable income. For crypto profits subject to Income Tax, individuals pay between 18% to 45% in tax depending on their total taxable income. For more information you can read our guide on tax on crypto in South Africa.
How can I do crypto arbitrage in South Africa?
The easiest way is to use the FiveWest Arbitrage Service which automates the process of the arbitrage for you. We handle the KYC documentation, the SARs clearance and the arbitrage process for you giving you peace of mind.
Can I use bitcoin to do arbitrage in South Africa?
Yes Bitcoin trades at a premium in South Africa due to exchange control therefore it is possible to use it to do arbitrage. The volatility of the Bitcoin price means that it is not as easy to use Bitcoin as say USD stablecoins. If you're interested in using Bitcoin to do arbitrage, take a read through our guide on Bitcoin brokers in South Africa.
Should I do the crypto trading to complete the arbitrage myself?
While you can do the crypto arbitrage yourself, there a a few factors to consider such as managing the price fluctuation of the cryptocurrencies themselves during the arbitrage, setting up international payments and doing the administration of registering the accounts, doing the SARB requests, etc. If you're interested in trying the trading yourself, be sure to take a read our guide on trading crypto in South Africa to help you out.