Japans's arbitrage opportunity
Japan provides a unique arbitrage market. Cryptoassets typically trade at a 1% - 2% premium in for the following reasons:
- Japan has capital control on outwards payments in foreign currencies.
- Japanese have adopted cryptoassets as a means to protect their wealth against inflation and the depreciation of the Japanese Yen (YPY). Therefore, there is a higher than average demand for cryptoassets.
- The combination of the higher demand and the difficulty of purchasing digital assets on offshore exchanges has created a persistent arbitrage gap.
- There are also limited exchange options catering for the local markets. Furthermore, these local exchanges do not have sufficient liquidity to create an equilibrium between buyers and sellers. Therefore, the buying demand always outweighs the selling demand, and cryptoasset prices trade higher.
How does it work?
Crypto Arbitrage has spent a lot of time and effort establishing the operations needed to profit from the Japanese market. We have established local exchange Over Counter (OTC) relationships that allow us to buy and sell cryptoassets off-exchange in high volumes without pushing prices down.
A typical arbitrage in the South African market works like this:
- We buy cryptoassets on an international exchange like FTX, Kraken, Coinbase Pro, Circle or Binance Institutional.
- We favour stablecoins like USDT, USDC, UST & DAI to protect against asset price fluctuation whilst transferring the cryptoassets to a Japanese exchange.
- We sell the cryptoassets/stablecoins on the South African market using an OTC provider. The benefit of using an OTC provider means we can execute the sale of the assets in one go without needing to initiate a sell instruction on an order book, which would undoubtedly have a detrimental effect on the price and would therefore diminish the arbitrage gain.
- Crypto Arbitrage then completes a cross border application to transfer the sold cryptoassets back to Europe or America. It takes a day to approve the application and the funds to move back into USD.
What returns can you expect from this market?
On average, profits in the market range between 1% - 1.2% per trade. These profits are added to your arbitrage plan.
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