Sale of MTI Bitcoins in South Africa Briefly Wipes out Premium Buyers – Finance Bitcoin News
The premium or arbitrage spread on bitcoin in South Africa recently turned negative after MTI Liquidators unloaded more than $75 million worth of coins. Due to this temporary oversupply, buying bitcoin on local South African exchanges became cheaper than on foreign exchanges for a short time.
Impact of CTB sales by MTI Liquidators
However, with the deal for the sale of the arbitration directors having been completed just under two weeks ago, the arbitration gap is positive. As noted by a South African media outlet, the BTC premium has since recovered and was at a record high on the 20th. April between 4.8% and 6.5%.
Meanwhile, the same report quotes John Ovadia, CEO of crypto startup Ovex, explaining why BTC is typically sold at a premium in South Africa. He said:
We’ve seen crypto emerge in countries where currencies are controlled, such as South Africa. This obviously has implications for the demand for monetary assets like bitcoin.
The OEB also examines the key factors that determine the size or degree of fluctuation of the arbitrage spread. Ovadia argues, for example, that when the dollar price of bitcoin falls, the arbitrage spread tends to increase because there is a lag in the South African bitcoin price cycle. Other important factors influencing the size of the spread are the massive printing of money by central banks and the rush for BTC.
Bitcoin premium and exchange controls
At the same time, Ovadia’s claim that BTC trades at a premium, especially in countries with strict currency controls, seems to be supported by the price range of the leading cryptocurrency in some countries.
For example, Bitcoin.com News reported in February 2021 that the BTC premium in Nigeria had risen to over 40% after the country’s central bank imposed restrictions on cryptocurrency trading. Nigeria, like many other countries on the African continent, has been suffering from a shortage of foreign exchange since the beginning of the 19 Covid blockade. Therefore, the country has since introduced strict rules to conserve this scarce resource.
Similarly, Bitcoin.com News reported in early April that BTC was trading at an 18% premium in South Korea. Like South Africa, the Asian economy is also subject to strict foreign exchange controls, which could explain the huge premium for BTC.
Why else do you think BTC trades at a premium? Tell us what you think in the comments below.
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