Calculating Ethereum Arbitrage Profit as an Indian User

in #crypto7 years ago (edited)

Arbitrage is buying of currency on an exchange where the price is low and selling it at an exchange where price is relatively higher. It often comes to one's mind that why do the trading if I can arbitrage to earn profit.
So, to clear that confusion here I am sharing the actual example to calculate the profit earned by performing Ethereum arbitrage.

I have considered following Exchanges for this process: -

  1. cex.io (For International Purchase)
  2. koinex.in (For Selling)

The reason for considering cex.io is that one can purchase ethereum using fiat Currency (I used USD). There are only number of international exchanges that let you buy cryptocurrency using credit/debit card from India. It should be noted that the price at Cex.io are usually high compared to other exchanges like Bittrex, Bitfinex etc. but these exchanges don't accept fiat currencies as deposits. Following is the commission for Cex.io.

Now considering Indian exchange Koinex. Koinex.in is the latest exchange that support multiple cryptocurrencies. There is no selling fees till 31st of December. After that it is only 0.20%. Also, they instantly transfer the money to your account using IMPS/NEFT unlike zebpay or other exchanges where it usually takes days.

Buying Ethereum at cex.io


Coming back to example.
Price of 1 ETH as Cex.io at time of writing this article is 773.9036 USD.

On converting USD to INR, it comes out to be around 49696.61 INR. Now Cex.io takes 3.5% + $ 0.25 as commission. So, the actual USD that you need to deposit is 773.9036 + 27.0866 + 0.25 = $801.2402 = 51432.01 INR.

Transferring Ethereum


Finally you have bought ethereum. It’s time to transfer your ethereum to Koinex. It takes 100 confirmations to transfer ethereum from cex.io to another wallet. So, in all it takes around 15-20 minutes. On transferring 1ETH you would lose 0.01ETH which is transaction fee.

Selling Ethereum at koinex.in


Now Price of ethereum at Koinex.io is INR 52700 (at time of writing this article) . So 0.99 x 52700 = 52173. Well still it's a profit of 740 INR. So, you would think wow, why not perform 9-10 transaction on daily basis (It would definitely raise alarm in the bank) and earn around 7400 INR.
Well here is the catch, you forgot about the mark up charge.
When you use your card abroad or make international payment, your card provider charges you a transaction fee of 3.5% of the transaction amount. So, the transaction amount is 801.2402 + 27.0866 = $828.3268 = INR 53191.42.

Okay now, so my profit is gone. But wait you forgot about IGST, yes IGST is charged at 18% on the markup fee. So, the total amount becomes 828.3268 + 4.875588 = 53504.50 INR.

So instead of profit you are at 53504.50 - 52173 = 1331 INR loss.

Total Cost of 1 Ethereum


Now there is one more thing that you may not be aware about, there is no interest-free period on cash withdrawals. You start paying interest (around 3.5% per month) the moment you withdraw using credit card. Also, there will 18% of GST on the interest. However, I have not included this in the calculation because you can avoid this by using international debit Card. Not to mention that the price of ethereum may decrease further till you transfer the ETH to koinex wallet.

So what's the result of this calculation?? Loss?? yeah it seems. But Indian exchanges operate differently than international exchanges so the price at Koinex may rise further as compared to Cex.io. So, you may be in profit some day and at loss other. In my opinion, you should look for the arbitraging opportunity. If you find one do it.
Also, loss of IGST is somehow mitigated by the reward points you receive on using credit/debit card. Further every exchange provides API, So create arbitrage bot (if you can).

It's my first post. I hope you would like the work I have done here and resteem it. I would share more arbitrage options soon, like for XRP tokens.

Thanks Friends!!