Sam Bankman-Fried (SBF) made millions daily even before the launch of FTX, thanks to a savvy strategy that’s set to be lucrative again with new crypto regulations coming this month. Here’s how you can replicate his success:
The Kimchi Premium: A Brief Overview
1. SBF’s Early Success: Before becoming the CEO of FTX, SBF made his fortune with Alameda Research, a crypto-trading firm he started in 2017. By 2020, he had grown its assets to $100 million.
2. Arbitrage Strategy: SBF capitalized on price differences between exchanges, particularly the "Kimchi Premium"—a significant price discrepancy where Bitcoin ($BTC ) was priced at $10,000 in the US but up to $15,000 in Korean markets due to high demand.
3. Expanding Arbitrage: Initially focused on $BTC, the Kimchi Premium spread to other cryptocurrencies. By late 2021, the price difference between exchanges like Binance and Korean exchange UpBit reached 200-300%.
4. Impact of Taxation: In late 2021, Korea’s planned 20% crypto tax, delayed to January 2025, reduced the Kimchi Premium but still left opportunities for arbitrage, like the recent $AVAIL example where significant spreads were observed.
How to Implement the Strategy
1. Understand Arbitrage:
- Goal: Buy low on one market and sell high on another.
- Initial Focus: Originally effective with $BTC, but now applicable to various cryptocurrencies.
2. Current Opportunities:
- Look for Spreads: The upcoming delay in taxation may increase demand, reviving the Kimchi Premium and presenting more arbitrage opportunities.
3. Monitor Markets:
- Track Prices: Regularly compare prices across different exchanges, especially those in regions with historical premiums.
- Quick Execution: Arbitrage opportunities can be fleeting, so act swiftly to capitalize on price differences.
By adopting this strategy, you can potentially replicate SBF’s success and make significant profits in the crypto space.
