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Crypto Arbitrage is not a good asset for MLM. Let's find out why

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Avatar for MikeZillo
Written by   7
3 months ago

Let’s start from a news from the last days: the CEO of Arbistar, Santiago Fuentes, has been arrested in Tenerife, and he has been charged for fraud, affiliation to criminal organization and money laundering.

I see many people denigrating many businesses telling that they are scams. When they are asked “why the heck are you saying that they are scams?” the best answer they can provide is: “It’s a scam because it is obviously a scam and it is not sustainable”.Well. I compare myself to the truffle dog when it comes up to scams. But I never say scam if I have not done a proper due diligence.

So, how do I detect a scam?

When someone suggest me a business, at first, I investigate why he is proposing me that business.

1) What kind of interest does he have for suggesting me this business?

2) How much is affordable this business?

3) What is the underlying asset that would provide that kind of Return on the Investment?

1) Is he going to earn a percentage on me joining the business or is he just such a magnanimous person? If he is going to earn a percentage on me, what would pay his percentage? Is my starting capital that is immediately separated into different incomes of the MLM structure?

2) How many people can join this business? Is the entry level from 100$ or the threshold is at least at some thousand euros equivalent? How many turkeys are they trying to pluck?

3) Some business may really be profitable, but how much are they really scalable?

Let’s make an easy example with the Arbitrage.

Crypto Arbitrage is a business which birth goes back to the first stock exchanges at the mid-20th century. You buy a stock on an Exchange where the price is lower and you sell it where it is higher. Easy at it is.

Through the year, different Multi-Level-Marketing have tried to setup assets on the Arbitrage, but the real gain has always been just for the creator of the scheme, that gained money in two different ways: network commission or the sale of automatic/semi-automatic arbitrage software.

So: if the uplines and the founder gains from my entry-package (initial investment), my money is separated. Let us say I invest 100$, and 15$ goes to the uplines, I am left with 85$ working.

Let’s do some math: 15$ on 100$ is 15%. So, 15% is the distribution to the network. From 85$ to get back to the Break-Even Point, requires a profit of 17.6%. Higher that 15%. Not revolutionary higher, but higher. With this thought I wanted to point your attention to a key point: higher the network commissions paid by the starting capital, less sustainable the business will be.

And if the business is based on the sale of software licences?

Well, the substance does not change, and we are just moving the problem onto the sustainability of the software licence. How many licences are enough to saturate the market? After market saturation, is the business still going to be profitable?

In case of a Crypto Arbitrage software, the more people have the same software, the less will be the profitability for all. So, if you are going to pay a software licence, be sure that is not affordable for so many people otherwise you will be ejected from the market, starting you losing path.

Anyway, not all Software licences affiliation schemes are not sustainable. Let’s say that a Company is selling a software for email management. Market can take long to reach saturation and even if you will not have residual profits from affiliations, you can still enjoy the software and its features and eventual residual incomes from monthly/yearly subscription.

Why Crypto Arbitrage is not sustainable if carried out with a MLM?

Well, Arbitrage catches orders beyond the negotiation range, but these orders may be depleted soon.

Let’s create a concrete example on the market Bitcoin/Dollar

Exchange 1.

Buy Price: 1000$

Sell Price: 1001$

Exchange 2.

Buy Price: 990$

Sell Price: 995$

We should buy BTC on Exchange 2 and try to sell it on Exchange 1. Profit would be around 1% minus trading fees.

I buy at 990$. The other guy that owns the “Crypto Arbitrage Super Pro Top Gain” software, will buy at 990$ or a price slightly lower, since the orders in the Book will finish soon or later. Let’s say that Guy 1 will buy at 991$. Guy 2 will buy at 992$ and so on until Guy 10 arrives, and he would buy at the price of 1000$. Buying at 1000$ to sell at 1000$? You are just losing time and trading fees. A specular thing would happen on the sell side, reducing the profitable spread between exchanges.

So, are you doing Arbitrage? I am happy for you. Sincerely.

Are you in a MLM proposing Arbitrage? Save your money and make a donation to plant some trees or feed some families. It would be a far better investment than a MLM arbitrage scheme.

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3 months ago
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