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On Wednesday, the price of Bitcoin on the popular exchange Mt.Gox exceeded $1,000 and hit a record high of $1,073 at the close. Along with this, there are still voices that Bitcoin may evolve into an arbitrage tool. But as Detective Conan often says: "You only look, but you don't observe." The threshold for Bitcoin arbitrage trading is far lower than imagined, and not everyone who has done this business is still sticking to it.
In April this year, the price of Bitcoin plummeted from $260 to $90. After a period of obscurity, Bitcoin ushered in unprecedented good times. In mid-November, Bitcoin returned to people's attention with a strong increase of nearly $100 a day, reaching a peak of $800 on November 19, and after a slight decline for a few days, it hit an intraday peak of $1,100 on November 27. Since the beginning of this year, Bitcoin has risen by more than 7,600%.
There are still barriers to arbitrage trading
"The price of Bitcoin is completely determined by the supply and demand of the market. If more people need it, the price will rise, and if fewer people need it, the price will fall." Li Qiyuan, CEO of Bitcoin trading website Bitcoin China (BTCC), said in an interview with China Business News. Since the supply and demand on each trading platform are not exactly the same, there is a price difference between Bitcoin on different trading platforms. The behavior of buying on a trading platform with a lower price and then selling on a trading platform with a higher price to earn the difference is vividly called "moving bricks" by Bitcoin players. Usually, the price difference between exchanges in different countries or regions will be larger.
There has always been a relatively large arbitrage space between the price of Mt. Gox, one of the global bitcoin price benchmarks, and the domestic bitcoin price benchmarks BTCC or BitStamp, which have become the main "workplaces" for many "brick movers". For a long time in the past, due to the enthusiasm of Chinese investors for bitcoin, the domestic price has been higher than the price of Mt. Gox, but this trend has reversed. Some industry insiders said that this may be due to some problems in several foreign trading websites that led to a decline in trading volume.
Whether the price is higher at home or abroad, there is always room for arbitrage, but this does not mean that arbitrage is "free money" with no threshold. The difficult problem to solve is the strict foreign exchange control in China.
"We are opening up the last link." An industry insider who is preparing to start bitcoin arbitrage trading on an experimental basis told the newspaper that their arbitrage path has basically been paved. They have their own methods on how to solve the problem of bringing US dollars back to China and bringing RMB to the United States, but at least for most ordinary people, large-scale arbitrage activities are difficult to carry out.
"People who are interested in Bitcoin are under 35 years old. Their social connections and resources are very limited. The threshold is not as low as everyone imagines." The above-mentioned industry insider told the newspaper, and legal supervision is also a risk that cannot be completely avoided.
"Get Rich" Stories Need to Be Treated with Caution
Bitcoin player Zhao Dong became famous because of the news that he "made a fortune by selling his house and speculating in Bitcoin", but in fact this story was a beautiful misunderstanding.
"In fact, there is no connection between my selling the house and playing with Bitcoin," Zhao Dong told the newspaper. "I sold the house because I felt that the real estate bubble was too big, and I didn't want to leave the money sitting there, so I started looking for some investment targets, and Bitcoin was one of them. In fact, the money I used to invest in Bitcoin only accounted for one-third of the proceeds from the sale of the house, and the proportion of my total assets was even smaller."
Zhao Dong is one of the founders of the popular mobile app "Moji Weather". After this successful startup, he sold part of his shares and invested in the new industry of Bitcoin. Now his "main business" is to match Bitcoin transactions among his friends, collect a commission from them, and invest in some good start-up projects, but most of them have nothing to do with Bitcoin.
Zhao Dong said that he paid attention to Bitcoin because of its speculative potential, but after truly understanding Bitcoin, he gave up the idea of using Bitcoin for speculation. "I started to get in touch with Bitcoin in March this year, and it happened to experience the sharp rise and fall in April. I saw an arbitrage opportunity, but I soon found that the short-term risk of doing so was very high." Zhao Dong said that he had also tried "moving bricks" for a period of time, and the income was "okay", but after doing it for a while, he found that this was not a "long-term solution."
"Especially when you do arbitrage through the price difference between domestic and foreign trading platforms, you have to bear the sharp rise and fall of Bitcoin, and you also have to face possible exchange losses. The risk of short-term operations is always very high. Although 90% of people who play Bitcoin are doing things related to speculation, only a few people can really make a lot of money." Zhao Dong said, "In fact, the essence of speculation and investment is to make a profit, but the mentality is different. Speculation is to make a quick profit in the short term, while investment is to take a longer-term view. I personally choose to hold for the long term."
Like many other Bitcoin enthusiasts, Zhao Dong also believes that Bitcoin is an innovation and experiment in the financial field. No one can predict the outcome, but they all want to join this "movement" to experience it for themselves. "I want to tell those who have the urge or interest to play with Bitcoin that you can take out a relatively insignificant amount of money to participate, but never give away all your assets, after all, the risks are obvious to all," Zhao Dong reminded. |
