The premium or arbitrage gap on bitcoin in South Africa recently turned negative following the offloading of coins worth over $75 million by liquidators of MTI. As a result of the temporary supply glut, buying bitcoins on local South African exchanges briefly became cheaper than buying on overseas exchanges.
The Impact of the MTI Liquidators’ BTC Sales
However, following the conclusion of the liquidators’ sale nearly two weeks ago, the arbitrage gap has now turned positive. As one South African media report notes, the premium of BTC has now recovered and was hovering between 4.8% and 6.5% on April 20.
Meanwhile, the same report also quotes, Jon Ovadia, the CEO of a crypto start-up Ovex, explaining why BTC is usually sold at a premium in South Africa. He said:
What we have seen is that crypto arbitrage gaps appear in those countries that have foreign exchange controls, such as South Africa. This of course impacts the demand for hard currency assets, such as bitcoin.
The CEO also discusses the principal factors that determine the size or the extent of fluctuations in the arbitrage gap. For instance, Ovadia states that when the bitcoin price in US dollars falls, “the arbitrage gap tends to rise as…