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Top 10 questions to ask before selecting a crypto arbitrage service provider.

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Top 10 questions to ask before selecting a Crypto Arbitrage Service Provider

When choosing a company to do crypto arbitrage trading with, you need to consider some fundamental basics. With tons of companies offering arbitrage services, here are some important questions you should be asking:

1. Is crypto arbitrage trading legal in South Africa?

Crypto arbitrage trading is legal anywhere in the world where Bitcoin and cryptocurrency trading is legal. In South Africa, there are no current regulations against cryptocurrency arbitrage trading and although the South African Reserve Bank is aware of arbitrage trading across local and international exchanges, no formal communication has been given about changing the regulations.

2. What is the minimum amount needed to trade?

Well, this will differ slightly depending on the company you choose but it is important to note because the minimum amount required will help you understand whether or not you are able to engage in crypto arbitrage trading. Most companies require a minimum amount of R50 000 but it is worth noting that the higher your initial amount of trading capital, the quicker your profits will be returned and the better the return will be.

3. Are there any fees involved?

This can also differ depending on the company you choose to use. However, the standard fees include a R500 SWIFT fee which the bank charges each time your money is traded and a percentage (usually about 1%) of the initial amount which the company charges for using their platform. But don’t let this deter you, you will still be able to make a profit!

4. How long does it take to get my money back?

Once your accounts are set up and your initial capital has been deposited into your FX account, it usually takes between a few days and a few weeks for all your trades to be completed. This is really dependent on the amount you are trading each time and on the market conditions. Of course, traders aim to make their clients the most profit possible so they might hold off on trading when the difference between the buy and sell price is not favourable.

5. How many times can I trade?

What’s great about crypto arbitrage trading is that you can use your initial capital over and over again. This means that the amount of times you can trade depends on the amount of money you invest. For example, if you have R100 000 in capital and you still have your full R1 million Single Discretionary Allowance to use, traders will do ten rounds of trading using the same R100 000 capital, and if you have R250 000 in capital and you still have your full R1 million Single Discretionary Allowance to use, traders will do four rounds of trading using the same R250 000 capital.

6. What do I need to understand about my Single Discretionary Allowance?

Every South African citizen and resident is allowed to send or use R1 million overseas each year - no questions asked. This is called the single discretionary allowance (SDA). However, every international purchase you make is deducted from your allowance. It is important to remember that international purchases include subscriptions to international services like Netflix or Spotify, physical goods purchased on international e-commerce websites like Amazon and even money you spend (or plan to spend) while on vacation in a different country. Therefore, you need to communicate how much of your single discretionary allowance you would like to use for crypto arbitrage trading for the year.

7. What do I need to understand about my Foreign Investment Allowance?

Every South African citizen and resident is entitled to send or use an additional R10 million overseas each year with prior approval from SARS. This is called the foreign invest allowance (FIA). Citizens and residents of South Africa can use this allowance for crypto arbitrage trading as long as they use their own money and follow the legally approved process of obtaining clearance to do so, something the company you choose should help you with.

Remember, you do not need to have R10 million in your bank account to use your full allowance per year because crypto arbitrage traders are able to use your initial capital over and over again. For example, if you have R250 000 in capital and you still have your full R10 million foreign investment allowance to use, traders will do forty rounds of trading using the same R250 000 capital and if you have R500 000 in capital and you still have your full R10 million foreign investment allowance to use, traders will do twenty rounds of trading using the same R500 000 capital.

8. Is there any risk involved in crypto arbitrage trading?

As with all trading in all industries, there is a risk involved. However, crypto arbitrage trading is one of the least risky ways to trade cryptocurrency. This is because traders buy and sell quickly (or even at the same time) in order to minimize market movements affecting your profits.

9. Is this a trustworthy Crypto Arbitrage Service Provider

One of the best ways to protect yourself is to thoroughly research the individual team members of a project before you invest. Legitimate companies also make the system itself and the progress of the sale easy for potential investors to view. Overall, be extremely cautious as you look for new investment opportunities in cryptocurrency spaces.

10. How do I know I’m getting the best bang for my buck

To answer this question, you need to look at the fees the company charges to do your crypto arbitrage trading. The SWIFT fee of R500 mentioned above does not change. However, the percentage of the initial amount which the company charges for using their platform is where you will see the biggest difference. Most companies charge 1% or more while here at Fivewest OTC Desk, we only charge 0.5% which is the lowest in the industry at the moment.

Published: 18 October 2022Arbitrage: Top 10 FAQs
Pierre Van Helden
CO-FOUNDER & MD

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