HOWTO Arb ATOM on Team Kujira FIN marketplace

Let's look at HOWTO arb $ATOM simply on @TeamKujira FIN.

Then, as a bonus, let's look at more complex ... more rewarding (?) arb-strategies for $ATOM on @TeamKujira FIN.

I've ⭐️ the ATOM, and ATOM-relevant, order books for this HOWTO.

Before I talk about $ATOM, specifically, may I share the FIN arb-α FRIST? #FRIST

It's this:

For ANY token, T, that has BOTH T/axlUSDC AND T/USK, there exists an arb, ε, for the price differential (%) of those 2 order books.

This applies to $ATOM, but it also applies elsewhere.

Now, I was going to show this with STARS, because, at the time, ε was sitting pretty at 11%. That time has passed. So: let's arb $ATOM, simply. How do we do that?

For context, the conversation, at that time, went as follows:

Let's see how this arb-α plays out in practice.

Let's take two simple examples: $SCRT and $STARS.

1. $SCRT has $0.636 on /USK (a) and $0.632 on /axlUSDC (b)

That δ is abs(a-b)/a: 0.63% or $0.63 on $100-worth arbed.

Given the volumes on those order books, not (much of) an arb. 

2. $STARS ⭐️⭐️⭐️

$STARS has half an order of magnitude LESS of volume. What's its ε?

δ(stars) = (0.027 - 0.024)/0.027; ε = 11.11%

Holy ...wut?

That means $100 $STARS arbed will get you $111 $STARS? Are you sure, el geophf?

Come and see.

Look at ATOM/USK and ATOM/axlUSDC prices:

their ε is almost 1%, or $0.93 for $100 of $ATOM arb'd.

Let's try it.

The plan of attack is to sell your $ATOM on the order book where the price is higher:

• 2023-01-09 placed: 8.3594 ATOM -> 93.7759 axlUSDC, SELL at 11.218 fulfilled

Then, when that order hits, 

swap the currencies:

* 2023-01-09 placed: 93.7759 axlUSDC -> 88.7307 USK, SELL at 0.9462 fulfilled

The currency swap took a half-hour or so.

Then, you buy $ATOM with the swapped currency.

• 2023-01-09 placed: 88.7307 USK -> 8.378771 ATOM, BUY at 10.582 fulfilled

So, on an arb of 8.3594 $ATOM we got 8.378771 $ATOM, or a 0.23% ROI.

Not a great arb, really.

Can we do better?

Yes, we can, but that involves the 'magical' order books.

Let's take a gander.

KUJI/ATOM Order Book

Let's take a look at ./vern, my main man, ./vern's recommendation for an $ATOM-arb.

Why does ./vern recommend starting off with KUJI/ATOM for the arb-path? What is this thing, this KUJI/ATOM order book, and how can you use it?

Recall that, in an arb you're going from a -> a, and you want to SELL a HIGH, and BUY BACK a LOW, right?

With that context, let's look at the $ATOM prices in the $ATOM order books:

• ATOM/USK: $11.04
• ATOM/axlUSDC: $11.076
• ... KUJI/ATOM: is ... $0.472?

No. That's the $KUJI price.

Oh, by the way, I'm running a limit-order arb as we're talking about this 'magical' order book, so:

• ATOM,KUJI,USK,axlUSDC,KUJI,ATOM
• 2023-01-09 placed: 10 ATOM -> 234.7418 KUJI, BUY at 0.0426 fulfilled
• 2023-01-10 placed: 234.7418 KUJI -> 107.9812 USK, SELL at 0.46 fulfilled
• ATOM,KUJI,USK,KUJI,axlUSDC,ATOM
•  2023-01-10 placed: 1079812 USK -> _ KUJI, BUY at 0.454

So, back to the order books.

So, the $ATOM price isn't explicit, but something else is: the $KUJI price. Let's look at the $KUJI prices:

• KUJI/axlUSDC: $0.474
• KUJI/ATOM: $0.472
• KUJI/USK: $0.471

The $KUJI price for KUJI/ATOM isn't the lowest, but it's down there.

So what?

The "so what?" is this: KUJI and ATOM are opposite each other in the order book in which they are paired, so, the lower in price one goes, the higher in price the other one goes.

This principle explains many things in life.

I mean: in crypto.

What does this explain?

Why do stables become more valuable when crypto assets lose value?

In fact, the lower in price a crypto asset goes, the stronger the purchasing power of a stablecoin is.

Have you ever thought why?

The opposite is also true: when a token skyrockets, say $BTC, you want more $BTC than the stables you have in reserve.

The same principal applies to KUJI/ATOM: the lower $KUJI goes, the more valuable $ATOM becomes.

Okay, but how does this 'value' translate into price?

This is where the Ratio comes in.

Above $KUJI's price is a ratio. Now, usually the asset is paired with a stable, so you've been ignoring the ratio, because it's the same as the asset-price, or close enough, haven't you?

But with KUJI/ATOM, the ratio is crucial! Because why?

Because for A/B, 

A's price is the price on the bottom,

and B's price is A's price / ratio.

Usually B is a stable, and A's price / ratio == 1.

But not for KUJI/ATOM.

For KUJI/ATOM I had:

$0.472 / 0.0424 = $11.13

Which was ~$0.10 higher than $ATOM's next highest price on the order books: $11.04.

Selling $ATOM on KUJI/ATOM just makes sense in this scenario. Ten more cents.

Geddit? 😎

I've given you the key to the KUJI/ATOM order book:

You have $KUJI's price.

You have the Ratio.

You have $ATOM's price.

When trading either $KUJI or $ATOM, look at this order book alongside the stables' order books, then buy or sell your tokens, informed.