When Arbitrations go South

What to do when an arb goes South?

ATOM

So, ./vern, my main man, ./vern recommended I trade

axlUSDC -> SCRT -> USK

on my $ATOM-arb.

However.

SCRT/USK is a dead pool.

Wat do?

Step 1: panic at the disco as I fandango on core. 

Step 2.a. Keep panicking

2.b. panic, more, as I struggle with the existential question: "2.b.? or not 2.b.?"

2.c. Cancel my order on the ded SCRT/USK pool

2.d. placed 351 SCRT -> _ axlUSDC, SELL at 0.708

Why? SCRT/axlUSDC has 1.5k volume. I move my liquidity to axlUSDC there.

When SCRT/axlUSDC sell order is fulfilled, I'll continue the $ATOM-arb from there. I was fortunate this time: $SCRT's price is rising, so I walk away from this mistake without needing to abandon the arb at a loss.

I have had to abandon soured arbs before.

DOT

Meanwhile, on my $DOT-arb, $ETH has rocketed up by $100, making my buy-order look ridiculous.

Same procedure, but different, because:

1. we do cancel the order, ...

But now we have $USK in hand.

We can do anything.

Right ./vern? My main man?

./vern sez: 

Now, I'm not going to SAY that ./vern's recommendations are problematic, but ...

./vern's recommendations are problematic.

Why?

1. the $STARS pools don't have a lot of liquidity, so I'll get stuck again, just as when I did with $SCRT.

and 2. the nextest bestest recommendation brings $DOT in at around ~25, which is what we started with.

So, is it easier to swap right back to $DOT, and more profitable?

Yes. Yes, it is.

• placed 113 USK -> _ DOT, BUY at 4.399 fulfilled 

So, when arb'ing 'x' across multiple order books, you always have to ask yourself, ALWAYS, ALWAYS, ALWAYS!

"Can I swap back to x at a profit?"

If the answer is 'yes,' I say, take the earnings and walk away as a winner, UNLESS, there's a longer path that's SUBSTANTIALLY better.

So, some of the best arbs are: x -> y -> x, like:

KUJI -> ATOM -> KUJI or

wETH -> USK -> wETH or

axlUSDC -> USK or ... whatever

A simple swap, then swap back, and you have more of 'x'?

Do I have to say this again, louder? 

YOU HAVE MORE 'X'!

That's an arb. That's a win.