Currency arbitrage is taking advantage of the different prices of currencies. You can take advantage of it by buying essential products in one country and selling it in another where the currency is undervalued, thus making a profit. This technique might not produce much money, but it’s an easy way to earn small amounts.
One of the most common areas where currency arbitrage occurs is between Australia and New Zealand. The two countries have a long history of consumers buying from each other, so the price difference is noticeable.
You have to sign up for an account with a cryptocurrency exchange, like Saxo Bank, to do currency arbitrage. While small amounts might not seem very impressive in Australia’s high standard of living compared to many other countries in the world, it could mean pretty good money when converted into another currency.
The different currencies can be divided into a higher chance of profit and a lower chance of profit. If you want to be sure that you’ll make a profit, choose a currency with a stable value in Australia, such as the US Dollar or Euro. On the other hand, you might want to choose a currency with a considerable variation of exchange rates, for example, during a financial crisis when you’re going to make more money because it will mean more significant profit when converted into Aussie Dollars.
How can you take advantage of currency arbitrage?
Buying currency directly
You can buy currency in person, but you need to be careful because this all depends on your negotiation skills. You have to find people that would like to sell their currency at a lower price than the current market value. It’s also advised not to reveal where you’re going with the currency until purchase. Another way is by buying currency online through websites such as Facebook or Craigslist. However, it might be challenging to know if someone wants to sell their currency or try to scam you, so use this method with caution.
If there are no limits for travelling outside Australia, making an international trip can help you take advantage of currency arbitrage. This technique is called ‘travel arbitrage’. For example, if you go to the US and buy something for $20, once you get back home, $20 can exchange for much more than it was when purchasing.
You can buy and sell foreign currencies according to market rates from currency exchanges. This method is best used if you’re going to need the currency very soon. You have to find a website where your target currency has a low exchange rate compared to the current Aussie Dollar value and schedule an order as quickly as possible. The problem here is that many websites charge fees for trading cryptocurrencies which means less money.
You can also make money by checking out countries/websites with restrictions for trading. If a country has a stringent rule about cryptocurrencies, you can buy it from Australia and sell it to other countries where the rules aren’t as strict. For example, China has introduced a rule prohibiting citizens from transferring money out of its country to stop capital flow outside its borders. Chinese people have started buying Bitcoin in bulk through online exchanges and then shipping them to Hong Kong to get around this obstacle. Once they’ve arrived there, they sell the Bitcoins on local exchanges and transfer the cashback home, bypassing China’s capital controls.
You can also take advantage of arbitrage by dealing with companies that have branches/offices both in Australia and other countries. For example, if there is a payment due in AUD, but you can get paid in another currency with more value, the company might accept your offer to pay for them with another currency.
Finally, you can also use peer-to-peer platforms such as Currency Fair or TransferMate, where you can trade different currencies with people from all around the world. These websites are designed to make trading fast and simple for everyone, so you don’t have to worry about lines or high fees. To do this, you have to set up your profile and look for someone who wants to sell their currency at a lower rate than what’s stated on online exchanges. If they agree, transfer the money to the person you’re trading with, and you’ll have the currency sum in no time.