Need advice on a trading multiple currencies

[fernandodlc]

Basically I want to be able to pump the markets where there is significant disparity between bitcoin prices and currency markets.

eg (not real life!)

Britcoin is Selling BTC @ £10
Tradehill is buying at @ $10

Echange rate USD -> GBP = 1.6

- Sell 100 bitcoins for £100 on Britcoin
- Buy $160
- Buy 16 BTC for $160 on tradehill
- Sell for £160 on britcoin

Obviously there are considerations like exchange times and clearance times on this. I could do this on paper and just use pooled funds to actually make the trades (ie don't make the currency exchange untill later because I already have liquid funds in both currencies)

The major hurdles I have are:
- I don't have a quick or easy way to add or remove funds from US exchanges, I have a US passport but live in the UK
- Even if I had a US bank account what are the charges for transferring funds and how long does it take? I could set up a USD account in the UK so that the currency trading is already done.

Any ideas?

[fernandodlc]

bump

[BitcoinPorn]

How much money do you have to invest in this little project?

[ascent]

What you're describing is arbitrage, and happens thousands of times a second by program traders in the currency markets. The programs profit, and render a service - that is, they keep disparities out of the market. Unless you can trade currencies in real time, (i.e. have a Forex account), it seems like it would be hard to do.

[fernandodlc]

Well I guess if it were easy everyone would be doing it.

I think there is a fair bit of scope for it in the bitcoin markets

just a quick look at bitcoin charts reveals thUSD @ 13.41 and Britcoin @ 9.76 XE says USD->GBP @ 1.62

9.76 x 1.62 = 15.8 so the Britcoin market is effectively trading a couple of $ above the thUSD right now. Even allowing for currency conversion costs you could make instant profit on that.

Anyone got any clue how to set up a US account from the UK?

[bonker]

There does seem to be arbitrage opportunity, I guess it's how easy you can get into the market that will make the difference. Leg risk and all that.

[ascent]

Well I guess if it were easy everyone would be doing it.

When it becomes easy, the disparities will disappear. That's actually what's so exciting about Bitcoins in general. It's an uncertain, immature emerging market without established infrastructure.

[zerokwel]

fern I was looking at that also. I know paypal you can convert between usd/gbp etc. but that does us no good. even with bitcoin7 within there own markets euro/usd etc there is a bit of a spread.

[fernandodlc]

fern I was looking at that also. I know paypal you can convert between usd/gbp etc. but that does us no good. even with bitcoin7 within there own markets euro/usd etc there is a bit of a spread.

The only way to do it as far as I can tell is to have a local account in each country that you want to trade currencies in. Then have a pool of cash in each, keep a record of your trades separately with your arbitrage calculations and then make your transfers periodically.

Of course you are exposing yourself to risks from currency fluctuations but USD/EUR/GBP is a good bit more stable than BTC so this should not be a huge problem in the short term at least.

[w1R903]

Fern, you might want to look at http://www.xe.com/fx/ if you've not checked out xe already.  They do currency trades but also can facilitate setting up local currency accounts.  I'm in the process of applying for an account with them.

I'm actually looking at the same thing as you, but from the US.  I'm in the middle of a big project (and am procrastinating as I write this), but I'll try to PM you once I'm through, if you're interested.  Perhaps we can help each other.

The one thing that sucks about currency arbitrage is that to make significant money, you usually have to start with a lot of money.  But the good thing is that it's relatively risk free if it's done correctly.  I think Bitcoin is ripe to be used as one leg of a currency hedge.

[HideousBeastManGuy]

You would be able to do this well if you hedged by using Forex Futures at the same time, that way you could lock in your arbitrage pricing.

[CurbsideProphet]

The problem I foresee is lack of volume on the BTC exchange (whichever you decide to use).  You need high volume in order to execute those trades quickly.