Scam Allegations
BTC Arbs was not created to be a scam, and was never intended to rip off investors. Bitcoin arbitrage is possible and many Bitcoin users have realized this and have started arbitrage trading on their own. Bitcoin arbitrage trading took place and earnings were made. Anyone who has ever looked at bitcoinaverage dot com can confirm this. The prices vary greatly from exchange to exchange, and there are always variations on the price. Even today, you can buy Bitcoin on BTCE for $556 and then sell it immediately on Bitstamp for $572. That produces a 2.7% profit, which is closer to 2% after exchange fees and transfer costs.
Really? REALLY? How dumb do you think people are to believe that this example legitimizes the impossibly high profits claimed by BTC-Arbs? On the other hand, judging by some posts in this thread you may have a chance...
Anyway, to buy 1 bitcoin and immediately sell it elsewhere, you need to have available both the bitcoin and the fiat money. Your profit estimate is based on the price difference relative to the value of just 1 bitcoin. Since you need an equal value of dollars for this trade, this immediately cuts the expected profit percentage in half.
So if that's where the story ends, it'd still be okay. But it doesn't. Exchange rate differences are almost always one-sided. How often is Bitstamp cheaper than BTC-e? Right. This means that for continuous operation you need to transfer fiat around constantly. And how fast are international wire transfers compared to Bitcoin transfers? Indeed, when operating efficiently you have to have many times more value in fiat money than you have in bitcoins. Most of this fiat money is in transit, through the slow international banking system yet for profit computations it can't be ignored. And while many times more fiat money is needed than bitcoins, it stands to reason that the actual ratio of deposits is the other way around, which would mean a large part of the Bitcoin deposits would just be sitting idle waiting for fiat to move around, yet still counting towards the total value of the investments and therefore affecting profit percentages.
But even disregarding that last point, since I have no insights into how much of each currency was actually deposited, the fact remains that with a price difference between exchanges of 2.7%, you can consider yourself lucky if you can reach a profit on the total value of the operation of 0.5%. Lower is much more likely.
The above isn't really news, I've made these rebuttals of BTC-Arbs' profit claims since the first page of this thread and noone has been able to offer a reasonable counter.