First Mover: How a DeFi Trader Made an 89% Profit in Minutes Slinging Stablecoins

Wednesday 12 August 2020, 11:07 PM AEST - 1 month ago

fm-aug-12-chart-2-diagramSchematic of Aug. 10 stablecoin arbitrage trade using DeFi. (Etherscan, CoinDesk)

In digital-asset markets, stablecoins like tether and USDC are supposed to represent $1 of value. But their prices often fluctuate on the pubescent trading platforms of decentralized finance, or DeFi.

So cryptocurrency traders are now apparently devising strategies to profit from slinging stablecoins in these fast-growing but often janky and thinly traded markets.

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In one Aug. 10 transaction on the Ethereum blockchain, a trader appears to have used a series of transactions in tether and USDC on the decentralized cryptocurrency exchanges Uniswap, Curve and dYdX to net a tidy $40,000 profit off a $45,000 initial investment. That works out to an 89% gain in what was likely a matter of minutes.

The whole transaction can be seen on the website Etherscan, used to access data recorded on the Ethereum blockchain. Heres that looks like:

fm-aug-12-chart-1-etherscanScreen grab of transactions used in Aug. 10 stablecoin arbitrage trade.

1) Trader started with roughly $45,000 in USDC tokens and borrowed another $405,000 on dYdX, for a total of $450,000 in USDC.
2) Exploiting temporary differences between the stablecoins face value of $1 and quoted prices, the trader was able to use Uniswap to exchange the $450,000 of USDC for $492,000 of USDT.
3) Trader swapped $492,000 of USDT for $492,000 of USDC on Curve.
4) Trader paid off the $405,000 loan from dYdX and had $87,000 USDC remaining.
5) The transactions cost about $2,000 in fees.
6) Trader netted $40,000 profit on $45,000 of initial capital.

fm-aug-12-chart-2-diagramSchematic of Aug. 10 ...

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