Cross-Border Arbitrage Opportunity Analysis

By Justin Barlow
March 17, 2021

US arbitrage in crypto has become increasingly difficult, with well-known market makers like Jump Trading and Cumberland DRW entering the space in recent years spreads between domestic exchanges have become razor-thin. With bitcoin’s volatility averaging roughly 5% over the last 30 days, arbitrage between US exchanges has become virtually impossible for the average trader to take advantage of.


Despite a lack of strong price arbitrage opportunities domestically, international crypto exchanges have provided profitable arbitrage opportunities since bitcoins inception.

The Kimchi Premium

In 2017, fund managers in the crypto space made waves taking advantage of something called the “Kimchi Premium” or a premium between crypto prices in Korea versus the US. The spread formed due to the South Korean government banning crypto exchanges from servicing foreigners and the strict capital controls in Korea which limit the amount of capital that can leave the country. The combination of these two factors made it very difficult, but not impossible, to arbitrage between US exchanges and South Korea and drove the premium for BTC in Korea as high as 50%. In a recent Fundamental Value podcast by The Tie, the founders of BxB capital, a crypto arbitrage fund reported that they were able to profit over $1 million a day by taking advantage of the Kimchi Premium in 2017.

The Kimchi premium receded during the bear market of 2018-2019 but has since reemerged due to regulation and the crypto bull market. The regulation in question, the implementation of a 20% crypto tax in South Korea, was delayed until 2022 prompting renewed demand in the Korean market before the law’s implementation. Since 2021, the Kimchi Premium has returned with spreads hitting two-year highs in January but leveling off to just 2% since.

Bitcoin Price in the US vs Korea

Barriers to trading in Korea: volatile spread, inability to create exchange accounts for non-residents, capital controls limit how much fiat can be sent out of the country.

Nigeria Premium

Nigerians have demonstrated themselves as one of the most crypto-forward cultures despite local legislation looking to bar crypto growth. On February 5, 2021, the Central Bank of Nigeria (CBN) announced a ban on the exchange of cryptocurrency by financial institutions and directed banks to close accounts trading in crypto. Since the ban prices in Nigeria have skyrocketed, with the cheapest offer on Local Bitcoins, a peer-to-peer exchange, standing at 23,332,83 NGN per BTC or roughly USD 56,700. The differences in these prices represent a 17% premium to US exchanges providing a sizable opportunity for arbitrage. Prices on Nigerian exchanges such as NairaEX reached over $75,000 in February before ceasing operations in the region suggesting extremely high demand. Despite a strong premium, with crypto trading via exchanges outlawed in Nigeria peer-to-peer transactions are the primary method for trading crypto. Because of this, you are unable to automate trading strategies and must make individual OTC trades which carry considerable counterparty risk.

Bitcoin Premium in Nigeria

South Africa Premium

South Africa has been known to be one of the larger cryptoeconomies in Africa, with major exchanges such as Digital Currency Group’s Luno servicing South African residents. Prices in South Africa range but are consistently 1-4% different than US prices providing a possible opportunity for those who can take advantage of changing market conditions. Barriers to Trading in South Africa: inability to create exchange accounts for non-residents, capital controls limit how much fiat can be sent out of the country. Volume is relatively low on South African exchanges (less than $1 million USD a day) making this strategy implausible for major funds with significant capital. Attempting to arbitrage large amounts of capital to South Africa would require you to hit a large portion of the order book, taking the spread down in the process.

Bitcoin Price in the US vs South Africa


Overall, opportunities for arbitrage in crypto are hard to come by but not impossible. In order to engage in arbitrage trading, one must have access to an overseas trading partner or must form an overseas business as spreads are higher internationally. In most of the places with a significant spread, capital controls limit the sending of capital from international banks back to US banks providing another barrier that individuals and businesses must overcome. Assuming you can repatriate funds, have a domestic exchange account, and have an international exchange account or trading partner there may be opportunities for arbitrage even in a competitive 2021 market.

Podcast Episodes

How a Crypto Fund Made $1M a Day Selling Bitcoin in South Korea
For the first time Alex Friedberg and JJ Petersen (Co-Founder at BXB Capital) share the crazy story about how they managed to make more than $1M a day in 2017 on the "Kimchi" premium. Watch here

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Justin Barlow

Justin Barlow

Justin Barlow, Author at The Tie

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