What I Learned from Arbitrage Trading Ripple XRP and Failing Miserably.
If you are familiar with the cryptocurrency world then you have probably heard of Ripple’s XRP by now. This centralized coin provides blockchain software for banks and it has been adopted rapidly in Japan and South Korea. Over the past few weeks it has outperformed all major cryptocurrencies and has forced itself into the market cap leaderboards, recently ousting Ethereum as #2.
As I write this article, XRP is currently trading around $1.92 on American exchanges such as Binance and Bittrex. If you look carefully at international markets, however, you will see that Korean exchanges are currently hovering around $2.50 per coin — a 30% increase.
Let the scheming begin.
What’s preventing me from buying XRP on Binance and sending it to Bithumb, one of the leading exchanges in South Korea? With a 30% difference I could make enough to pay the transaction and currency conversion fees and still come out with a profit! So I open an account on Bithumb and begin plotting my path to cryptocurrency domination.
Step 1 — Opening the Account
Bithumb’s software immediately recognizes that I am logging on from an American IP address, so they present me with the English version of their site. Perfect, this must mean they have frequent traffic from the US.
It is shockingly easy to open an account and the only verification required is my phone number and email address. Within minutes I am ready to go.
Step 2 — Depositing XRP
Easy enough, right?
Wrong. It comes to my attention that this is the first time I am ever sending XRP to another address. This entire time I have traded exclusively on Binance and have had no need to withdraw. If I needed to sell I would just trade directly for Ethereum and transfer to Coinbase. Apparently, sending XRP is slightly different than other currencies and it requires a destination tag to properly reach its destination. Guess who forgot to include one.
The transaction fails and after about a half hour the coins are returned to my Binance wallet, ready to start fresh.
Step 2, Again
Ok, all should be good now. I add the proper destination tag, double-check the address and send the coins.
Ten minutes go by and there is nothing in my Bithumb account.
According to the XRP ledger the payment was successful, yet there is still nothing in my Bithumb account. Whatever, I’ll just take a look around the website while I wait and figure out how to withdraw Korean Won so I am ready when the time comes.
Step 3 — Become a Korean Citizen
I wish I knew about this step when I started this whole thing. As I sit here with my XRP coins in cryptocurrency limbo I realize that this is probably the reason why people don’t take advantage of the price difference between the markets. Even if my coins miraculously appear in my Bithumb account and I trade them for Won at a 30% profit I will have no access to the currency.
Step 4 — Claim Title of Ripple Arbitrage Expert
Best case scenario I get my Ripple XRP back in my Binance account, losing only the transaction fees. Worst case scenario I lose all thirty coins and about two hours of my time.
Regardless, I let greed blind my judgement and was punished for it. Arbitrage trading is still possible with cryptocurrencies but is only practical with domestic trading, and even then the margins are so small you will probably need software to show any returns.
The Korean markets are like a mirage on a desert — they look promising from afar but in reality they’re nothing more than a false promise.