Ben Jordaan of crypto arbitrage company Shiftly notes how regulation has been a blessing and a curse for crypto arbitrage, introducing thousands of new participants while also squeezing the profits as demand increases. From Moneyweb.
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Pioneers in crypto arbitrage remember with fondness the days when you could buy bitcoin (BTC) abroad and sell it a few hours later in SA for 6% or more. That was back in 2016 and 2017. It was a case of rinse and repeat.
Those days are clearly gone as arbitrage premiums have dropped to 1-2.5% and sometimes less.
Ben Jordaan, chief revenue officer at crypto arbitrage company Shiftly, notes an extraordinary rise in demand for crypto arbitrage following the licensing regime introduced by the Financial Sector Conduct Authority (FSCA).
Suddenly, wealth managers and family officers are getting in on the act.
This was forbidden territory before licensing, but now the floodgates are open, says Jordaan – often to the detriment of the arbitrage trade. Currently, net profits are less than 1% per trade.
But does this mean the possible end of crypto arbitrage, which is a relatively risk-free way of making 30-50% return on capital?
Not at all, says Jordaan. We are currently in a market lull, but anyone predicting the demise of the arbitrage market may have to rethink their assumptions. It has a tendency to evaporate for a few months and suddenly bounce back to life.
Shiftly reported a net profit to investors of 52% in 2024 on a minimum R200 000 investment. Jordaan says if the market disappears one day – and that may or may not happen – Shiftly intends to be “the last man standing” by keeping its overheads low and relying on automation to execute most of the grunt work.
And what happens should SA one day remove exchange controls? Even then, believes Jordaan, crypto arbitrage would never completely disappear. Price discrepancies in crypto assets between SA and abroad have a tendency to resurface whenever the exchange rate takes a hit.
So don’t expect the crypto arbitrage market to die out any time soon, he says.
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