Today I’m going to share with you a very powerful — and profitable — trading strategy.
Under normal circumstances, this isn’t a strategy you can take advantage of often.
In fact, the opportunity to use it tends to occur just a few times a year — and even then, most people miss out on it.
But if you know what to look for, and you’re prepared for it, this simple strategy gives you the chance to lock in a windfall of guaranteed profits.
Today, I’ll share the details behind this powerful strategy…
Then I’ll show you how a new asset class is giving you the chance to use it every day.
We’re Not in Kansas Anymore
I learned about this strategy when I took my first trip overseas.
As a sophomore at Columbia University, I spent a semester abroad in China.
China was different from America in almost every way:
The food, the smells, the traffic, everything — and I loved it all.
But one of the things I loved the most was the money.
More specifically, I loved that when I went to the bank to get cash, for every U.S. Dollar I pulled out, I received about ¥8.00 Chinese Yuan.
You see, I soon discovered that most of my day-to-day purchases cost about the same in Chinese Yuan as they did in U.S. dollars.
For example, in New York, I was used to spending $5 for a decent beer…
But in China, instead of $5, I’d pay ¥5.00 — which worked out to about 63 cents!
Not only did this pricing discrepancy greatly increase the amount of beer I drank, but it taught me the key to the investing strategy I’m about to show you…
Arbitrage: Guaranteed Profits
The strategy I’m referring to is known as “arbitrage.”
Arbitrage occurs when you can purchase an asset in one place, and instantly sell it elsewhere for a higher price — locking in a guaranteed profit.
This may sound confusing…
Why would the same exact asset have two different prices?
Well, let’s go back to my time in China…
In China, I was able to buy a beer for about 63 cents instead of $5. And it had nothing to do with the brand of beer I was drinking.
Instead, it was because the exchange rate between the Chinese Yuan and the U.S. Dollar allowed me to buy beer at a discount.
In fact, if I’d been able to sell my $0.63 beer back in the U.S. for $5 per bottle, I could have made a tidy profit.
Unfortunately, that’s tough to do with physical assets… it would take too much time and money to deal with shipping, etc.
But with a digital asset, such arbitrage opportunities present themselves constantly.
Crypto-Currency Arbitrage
More specifically, digital currencies like bitcoin and ethereum give investors the perfect opportunity to identify arbitrage profits.
This is mainly due to three factors:
- Crypto-currencies are Digital — Because crypto-currencies are digital, they can easily be bought, sold and transferred around the world.
- Crypto-currencies are Global — Since bitcoin trades on 40+ exchanges in over 30 local currencies, there are hundreds of opportunities for pricing discrepancies. Not only could the price of bitcoin differ from one exchange to the next, but the exchange rate for bitcoin could vary wildly between different currencies.
- Crypto-currencies are Volatile — Because there’s no central bank that regulates the price of bitcoin, its price can be volatile. For instance, in just the past seven days, bitcoin rose from $3,543 to $4,203 — a 20% move.
And these factors are contributing to a bitcoin arbitrage opportunity right now…
Forget the Beer — I’ll Have a Bitcoin
Two weeks ago, China’s banking authority announced it would be closing all the bitcoin exchanges operating within the country by October 1st.
This sent Chinese bitcoin traders into a panic. They quickly started selling off their bitcoin before they got locked out of their accounts.
This caused the price of bitcoin to sink on China’s exchanges. In fact, it quickly sank so much that it opened up a significant arbitrage between its price in China and its price in the United States.
If you visit one of China’s crypto-currency exchanges (for example, OKCoin), you’ll see that the price of bitcoin is roughly ¥25,200. That’s about $3,783.
But if you visit U.S.-based Coinbase, you’ll see that bitcoin is currently priced at roughly $4,200.
That’s a $417 price discrepancy!
So, if you had accounts on OKCoin and Coinbase, you could buy bitcoins in China, instantly transfer them to the U.S., and then sell them.
Every time you executed that trade, you’d earn a 10% profit!
And theoretically, you could execute that trade over and over again, until the arbitrage went away.
Quick, Easy Profits
With crypto-currencies, arbitrage opportunities like this happen often…
Unfortunately, unless you’re constantly checking prices at dozens of exchanges — and have accounts set up on all of them — you’ll have a tough time getting in on them.
However, we recently came across a crypto exchange that does the heavy lifting for you…
It’s called SFOX.com.
Basically, its technology “plugs into” different bitcoin exchanges and actively identifies arbitrage opportunities.
Currently, it only focuses on domestic exchanges, so the pricing discrepancies aren’t as wide as 10%...
But I predict SFOX will soon expand into other geographies and currencies.
When that happens, it could be an exciting place to park some of your capital:
It would enable you to take advantage of arbitrage opportunities right when they open up.
Happy investing.
Best Regards,
Founder
Crowdability.com
