Schematic 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.
Youre reading First Mover, CoinDesks daily markets newsletter. Assembled by the CoinDesk Markets Team, First Mover starts your day with the most up-to-date sentiment around crypto markets, which of course never close, putting in context every wild swing in bitcoin and more. We follow the money so you dont have to. You can subscribe here.
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:
Screen 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.
Schematic of Aug. 10 ...