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One of the negative effects of 2020’s biggest scam? This.

The arbitrage gap on Bitcoin in South Africa recently turned negative, as Mirror Trading International’s (MTI) liquidators dumped around 1300 BTC – worth nearly R1.2 billion – on the South African market, creating an oversupply for around 2 weeks.

This oversupply on the South African market caused the local Bitcoin price to drop slightly, reducing the arbitrage gap, which eventually turned negative, meaning that Bitcoin was actually cheaper to buy on local South African-based exchanges as opposed to buying Bitcoin on international exchanges. Although it is common for the arbitrage gap to fluctuate, it is an extremely rare occurrence for it to drop to negative levels.

Speaking to Global Crypto, Farzam Ehsani, CEO of VALR said: 

“At VALR we keep a very close eye on the Bitcoin arbitrage, as we offer this service to our customers and noticed that during the liquidations the arb actually went negative. We saw a lot of selling activity on some local exchanges and could see there were big sellers in the market.”

Bitcoin and other cryptocurrencies in South Africa usually trade at a higher price, compared to other international markets, owing to the harsh exchange control regulations that exist in the country. These exchange control regulations limit the supply of cryptocurrency, creating a higher demand from buyers, increasing the price of Bitcoin and other cryptocurrencies in South Africa. 

The arbitrage gap has since returned back to normal.

Farzam added that: “The Bitcoin market in South Africa is healthy and vibrant – VALR processes over R200 million in Bitcoin trading most days – and the arbitrage opportunity re-emerged after the liquidators had sold the Bitcoin. In the last few days VALR Arbitrage customers have been seeing returns of 3-5%, indicating that there has been strong demand for Bitcoin in the market.”

It is important to note that this is just one of the significantly damaging outcomes related to scams. Scams negatively affect every aspect of our nascent industry, and every person interested, invested, or working in the realm. As our industry and sector matures, we hope that the scams abate and the true purpose of cryptocurrency can function freely, unfettered by the actions of nefarious parties.

Feature image by Andrew Drake from Shutterstock