Orbits FAQs

What’s Lumina’s story?

I originally started doing arbitrage in mid-2017 when I realised there was a price discrepancy between the exchanges. Back then the returns were as high as 25%, which made it easy, even when mistakes occurred. It used to take me hours of calculations and processing to make a profit. After a while, I started doing it for family and close friends. 

I’ve come a long way since then, massively improving the process to make sure trading occurs as optimally and efficiently as possible. I eventually left my Data Science job, which I loved, when I had a quarter-life crisis in 2019 to start up Lumina.

What are your fees?

Lumina charges 33.33% of the profit from each Orbit completed. See how we set our fees.

Why does this opportunity exist?

Honestly, we’re not sure – our best guess is that it’s caused by people trying to financially emigrate without going through SARS. Perhaps they’re willing to spend a bit extra to move their money out of the country, which pushes up the SA exchange’s prices. This is based on the fact that there’s a limit to what SA citizens can take out of the country in a normal calendar year.

Whatever it is – we’re just happy that it exists.

How did you set your fees?

At first glance, a fee of 33.33% may seem rather high. Please remember that this is 33.33% of the profit earned from each Orbit, and not based on your investment. Another way of looking at it is if you invest R100k and get a return of R3k (i.e. 3%), Lumina’s fee would be R1k which is 1% of the investment – less than asset managers charge. In this way, it’s an incentive for Lumina to perform as optimally as possible because the company will be benefiting directly from doing so.

This fee primarily includes software maintenance for the automation of this process, which is incredibly time intensive. Another major consideration is the method of avoiding your exposure to the cryptocurrency – if BTC plummets, you’re not affected at all, but Lumina is. This is a massive capital cost for Lumina.

Other things which are also covered here are infrastructure costs and R&D costs. We need to keep researching and developing new methods to improve our services which in turn improves our offerings for you..

What returns can I expect?

Let’s get this out of the way: returns cannot be guaranteed – due to the nature of arbitrage and the macroeconomic risks. Please see here for more information.

It’s important to note that this isn’t a normal investment strategy – you don’t actually get a return based on your investment. You’re actually getting a return on how much money you send out of the country – how much you do is up to you and dependent on your limits. 

In theory, each person can send out a maximum of R11m in one calendar year in terms of the current exchange control regulations (see limits) and your returns are actually based on this amount.

The return you receive is dependent on the arbitrage rate and is expected to average out at around 2% for the year. Sometimes you’ll be lucky and get a 3% return, and other times you’ll be less lucky and get a 1% return, but should balance out at around 2%.

If you average a 2% return for the year, and if you were to send out the maximum R11m, your returns would be R220k for the year. Note that this is mostly irrelevant to the amount invested – which is why we say it’s not a normal investment strategy.

Alright, what do your historical returns look like?

Our average nett return per Orbit to date (January 2021) is 2.6% with the highest return being 5.9%. All-in, this comes to a total of R4.7m profit realised for Users from a total of 840 Orbits completed.

We aren’t always lucky, but the more work we put into the process, the luckier we seem to get. See about our losses.

What about your losses?

Unfortunately, due to the risks involved in this venture we have incurred losses in the past. There have only ever been two cases of losses, but still. We’re also proud that they were managed quickly and effectively, and thus they turned out to be minimal.

The first one was a loss of R225.93 (0.01%) – this was caused by extremely adverse FX conditions and the arbitrage rate took a steep dip.

The second was when an extended delay in SWIFT transfers caused over-exposure to FX risk and resulted in a loss of R435.76 (0.7%).

We haven’t had any losses since June 2019.

How much longer will this opportunity last?

We don’t know – when we first started doing this in 2017, we thought it would last a couple of months at most, and here we are.

Is this legal?

Completely – this is a way for economic markets to reach equilibrium. From the exchanges which trade Bitcoin and cryptocurrency, to the banks which convert your funds, they have demanding AML and KYC procedures in place. 

This explains why they get so sticky about where your funds came from and request so much information – they’re not trying to be difficult, they just don’t want people to do money-laundering and fraud here. 

Why does the arbitrage rate change so much?

The arbitrage rate fluctuates quite a bit – sometimes within an hour and sometimes within weeks and months – it depends on macroeconomic factors. Normally when the SA economy is doing poorly, the arb rate is better. When JZ was president, every time he opened his mouth or fired a minister the arb rate would jump. Things have been more stable with Cyril. The Rand’s performance also has a big impact on arb rate. When the Rand is undervalued (read weaker) the arb rate is lower, when it’s overvalued (read stronger) the arb rate is higher.

Outside of SA, global appetite for Bitcoin – which is fueled by all sorts of things – also impacts on the arbitrage rate.

When is the best time to send?

Bear in mind the cutoff times for each outsourcer. It’s usually best to send on the same day to minimise your exposure to FX risk, before the cutoff time.

Due to the FX risks, we suggest keeping an eye on the EUR/ZAR market. It’s usually worse to send when the rand is undervalued as it could signal a sudden strengthening which would increase your FX risk exposure.

Another consideration are the international bank holidays – SWIFT payments are not processed over these days as markets are closed and exchanges will not be able to process deposits on these days either.

What are the risks involved?

The only risks you’re exposed to are the FX rate risk, the cryptocurrency exchange risk, and the arbitrage rate risk. Please see here for more details as well as the impact that these risks are likely to have.

Isn’t Bitcoin risky?

Short answer: not for you.

The way this service is set up completely eliminates your risk exposure to cryptocurrencies and bitcoin. You might as well be doing this process with any other commodity, like cereal or orange juice.

How long does one Orbit take?

This varies considerably based on multiple factors. 

Exogenous to Lumina’s service:

• Treasury outsourcing times
• Interbank transfer times
• Exchange deposit schedules
• Bank holidays in the exchange’s country or in the US
• SA bank withdrawal times

Endogenous to Lumina’s service:

• Bitcoin volatility (price drops mean that it will take longer to process)
• Bitcoin volume (lower trading volumes will result in slower processing)
• Hedging functionality availability
• Blockchain capacity

Ordinarily, funds arrive the next business day after they’ve been sent and Lumina processes them within about 8hrs. From here they’re withdrawn to your selected bank account, which should reflect within 1 business day. All-in-all, around 3 days.

When do you take your fees?

Fees are taken in BTC after the successful completion of an Orbit before funds are withdrawn – no need for you to do anything. If something goes wrong with this automated process, we’ll be in touch to ask for further help.

Do you have any benefits for me if I refer my friends and family?

Yes! Our referral program is called Satellites Please see referrals.

Why won’t you manage my accounts for me?

So many reasons. Luno, VALR and Kraken don’t like this – it goes against KYC and AML processes for anyone to have control over multiple accounts. Besides, it looks dodgy for the same IP address to log in to multiple people’s accounts.

On top of this, we are not a registered FSP (why not?), therefore we cannot take  control over your funds.

We’re still happy to assist wherever and however we can when it comes to account management.

In the future, we aim to become FSCA2 authorised, and in this case, you won’t even need to create accounts on any platform – super exciting!

Why aren’t you a registered FSP?

The main reason is that registered  FSPs cannot deal with unregulated markets, which Bitcoin currently is – so we wouldn’t be able to do this arbitrage anymore if we were.

Then on top of that, we don’t really want to or need to be – because we don’t want to manage your funds for you at the moment. That comes in to being FSCA2 Authorised, which we aim to be in the future.

What are your goals for future development?

It is our goal to decrease our rates from the current standard of 33.3% to 25% – something that is only possible with a greater scale – please see referrals. This price drop is optional – we’re planning on giving clients the opportunity to donate the difference to a charity (a bit further down the line).

I aim to become FSCA2 authorised, so you won’t need to create or maintain your own accounts, however, this will take a while – maybe even a year.

What should I do with my profit?

As you’re in full control of your funds, you can choose to either withdraw your profit or put it back into the Orbit to reduce the fixed costs of sending and reach your limit faster.

A solid strategy which we know some people do (but not to be construed as advice) is to keep your profits Orbiting until you’ve made as much profit as your original starting value (i.e. your returns equal your investment or you have an ROI of 100%). From here, take out your original starting value and then let the profits keep going – this way you’ve essentially completely cut out any risk as you have your money back again.

What about taxes?

Up to you what you want to do. Lumina issues you with an invoice which should be used to declare income tax.

Unfortunately, this is not Capital Gains Tax (CGT) because this activity fits under normal trading activities which makes it subject to ordinary income tax.

What is an API and the Credentials?

An Application Programming Interface (API) is an interface which allows programs to perform functions on a system. In this instance, they act as a form of login to the back-end of the exchanges and allow Lumina’s systems to perform trades and other related tasks (such as withdrawing Bitcoin or Rands) on behalf of our users. 

The credentials are what allows the system to authenticate itself and they do provide limited access to your account – for this reason they should be kept extremely safe.

How do I stop using your services or terminate my contract?

The service is run on an ad-hoc basis, therefore no formal termination is necessary – simply stop sending your funds to the exchange and asking us to process them. As you are in control of your funds, you can simply remove your funds from your treasury outsourcer account at any time.

You are welcome to formally terminate your usage of our services by getting in contact with us. All that this entails is us deleting your details and credentials from the system.

If you would like to terminate in the middle of an Orbit, then you will need to wait for the Orbit to be completed and your funds to be withdrawn.