VALR Arbitrage is our international arbitrage service that takes advantage of the differences in the price of bitcoin between local and international markets.
Why is there a difference in prices between South Africa and other markets?
The price of bitcoin (BTC) and other cryptocurrencies in South Africa often trades at a premium to international markets. The reason is that there is more demand to buy cryptocurrency in South Africa than available supply due to exchange control regulations (South Africa's capital control regime). When there isn't enough supply of bitcoin to fully meet demand the price goes up in South Africa relative to other places.
How does VALR Arbitrage work under the hood?
VALR Arbitrage helps customers "buy low and sell high" simultaneously in local and international cryptocurrency markets to lock in a profit. Practically, this involves the following:
- We'll guide you to open an account with our FX partner (the account will be used to buy USD at preferential rates)
- Our proprietary and hedged trading system will then do the following simultaneously: (A) Use your ZAR to buy USD; (B) Use the USD to buy cryptocurrency with one of our international cryptocurrency partners; and (C) Sell the cryptocurrency purchased internationally on the local South African market.
At a high-level (and in symbols) this is what is happening: ZAR --> USD --> BTC --> ZAR.
Will I get my profits in ZAR or BTC?
Either! Before starting to trade for you our team will ask whether you prefer to receive your profits in rand or bitcoin.
How long does it take to get my money back?
The timeline for getting your capital and trading profits back depends on two things:
- The VALR Arbitrage client service team confirming that we're ready to start assisting with your arbitrage trades; and
- You making a deposit of your initial capital into your FX account.
From there, it takes between a few days to a few weeks for all your trades to be completed - the range depends on how much capital you are trading. If you are doing a single trade, you should have your capital and profits back in your VALR account within days, depending on market conditions.
Customers can also reuse their initial capital for several rounds of arbitrage trading. For example, if you have R200,000 in capital and you still have your full R1 million Single Discretionary Allowance to use, we will assist you to do 5 rounds of trading the same R200,000 capital. This may take a week or two, but you will see your profits start accumulating after each round.
The higher the capital you have, the greater the return will be (all other factors remaining the same) as the fixed banking FX costs don't need to be incurred for each round of the arbitrage trade.
In summary, the higher the initial amount of trading capital, the quicker your principal and profits will be returned and the better the return will be.
Is there a referral program for VALR Arbitrage?
VALR offers a referral reward program for VALR Arbitrage. Rewards are equal to 10% of the profit share earned by VALR on each trade.
To participate in earning referral rewards, referred customers should add the VALR referral code of their referrer into our sign up form.
There are no limits on the number of referrals. Rewards are uncapped and paid in the same currency in which profit has been generated.
Cumulative rewards are paid monthly in arrears at the beginning of each month.
For example, if an arbitrage trade earns VALR a profit share of R1000, R100 of that profit share is paid to the referrer.
Why do I need a foreign currency account to use VALR Arbitrage?
Using VALR Arbitrage includes using your own funds to purchase cryptocurrency on international markets. These markets typically do not accept deposits in South African Rand and you'll need access to currency such as USD to trade in these markets.
What do I need to understand about my single discretionary allowance?
Every South African citizen/resident has available to them R1,000,000 per year in allowance that can be used to send funds offshore for whatever purpose that person wishes - this is called the single discretionary allowance (SDA)
Every international purchase counts towards your allowance, including subscriptions to international software services like Netflix, as well as physical goods purchased on Amazon.
VALR caps the trade under an SDA to 950,000 to allow some room for clients to utilize SDA for any other international purchases. Please be sure to let us know when signing up how much of your SDA you would like to use for the current calendar year.
Who owns/controls the foreign currency account you sign up for?
The foreign currency account you'll open is a bank account in your own name. This bank account belongs to you and you have full control to deposit, withdraw or use this account to purchase foreign currency at preferential forex rates that we have negotiated for our customers.
Does VALR decide what the price of bitcoin is on the exchange?
No. It's important to understand that VALR does not set the price of Bitcoin. Buyers and sellers on VALR determine the price based on what price they are willing to pay to buy and sell Bitcoin. VALR provides a free market and the forces of supply and demand determine the price of bitcoin.
What do specific terms mean?
- Arbitrage - Taking advantage of differences in the price of the same asset in two different market places by buying the asset where it trades at a lower price and selling the asset simultaneously where it trades at a higher price to lock in a profit.
- Single Discretionary Allowance (SDA) - Every individual resident of South Africa is subject to exchange control which governs how much money they can send out of the country per year. Your SDA is available for whatever purpose you choose and the allowance for every individual over 18 years old is R1 million per year.
- Foreign Investment Allowance (FIA) - Every individual resident of South Africa is entitled to an additional R10 million allowance per year that they can take out of the country with prior approval from SARS. Residents of South Africa can make use of this allowance to procure Bitcoin as long as they use their own money and follow the legally approved process of obtaining clearance to do so, which VALR can assist you to obtain. You do not need to have R10 million in your bank account to access the full allowance per year, multiple applications can be made to access your allowance during the course of a particular year.
- South African Revenue Service (SARS) - The tax regulator in South Africa.
Where do I sign up?