KUJI/ATOM-arbitration

Do you want to see a magic-trick?

$KUJI's price is skying, relative to 35 days ago. So, now $KUJI-arbitration is a thing, again.

What is '$KUJI-arbitration'? It's starting with some amount of $KUJI, k, doing some trades, then ending up with more $KUJI, k + ε

Let's talk.

Why Arbitration?

First off, let's deal with arbitration-as-a-thing, because some of you are wondering why I focus so much time on arbitration: a technique usually only available to whales, ...up to this point.

Why, geophf? Why?

Arbitration:

1. costs nothing (relatively)
2. gives you something.

Let me explain what I mean.

Traditionally, if I have k $KUJI, and I want more $KUJI, I go buy some with $axlUSDC (money) or $USK (money, minted or bought).

That costs money.

With arbitration, if I have k $KUJI, I arb to k+ε $KUJI, and keep arbing until I have the $KUJI I want.

 

What does that mean?

That means, with the protocols @TeamKujira provides, arbitration is now available to poor people – people like you and like me – to work their way to having as much $KUJI, or $ETH, or $DOT, or $ATOM, or $BTC, or $BNB, or $PAXG, or whatever, as they want.

HOWTO

"But HOW, geophf, HOW can I arb like the ArbenMeisterszorxen, toiself?"

(that is geophf-language. That's an official language now.)

I've shown you, in prior articles, how to arb axlUSDC/USK (the 💸🖨️), and how to arb the x/axlUSDC - x/USK order books.

Now let's get FONCÉE! 😎

Okay, arbing $KUJI or arbing $ATOM.

Basic

The most-direct way to arb these, or any asset x, that has an x/axlUSDC and x/USK pair-o'-order-books is to sell x on the higher-priced book, swap on axlUSDC/USK order book, then buy back x+ε on the lower-priced book.

Easy-peasy!

Let's take $KUJI as an example. 

The $KUJI/stable order books are:

a. KUJI/axlUSDC: $0.66

b. KUJI/USK: $0.655

So you sell your $KUJI on a., swap the earnings to $USK on axlUSDC/USK, then, with that $USK-liquidity, buy-back your $KUJI, and then some, on b.

$KUJI-arb. Easy-peasy!

KUJI/ATOM Order Book

But now I want to show you a magic-trick, available only to trading Wizards 🪄on @TeamKujira FIN from day 1 (and, after this article, available to us smol 🥔 traders, too! YAY! 🎉).

Ladiez and Gentles, I present for your trading-pleasure, the KUJI/ATOM order book. 

What is magical about the KUJI/ATOM order book?

It's so d-mn inefficient, that's what!

Let me explain.

Do you see the quote (price-of-KUJI) on the order book?

It's $0.678, or higher, MUCH higher than either KUJI/axlUSDC (0.649) or KUJI/USK (0.651).

So? Who cares?

I do.

I care, and you should, too. Why?

As a trader you want 

• to buy (valued) assets low, and 
• to sell high.

$KUJI's price is higher on the KUJI/ATOM order book (IN THESE MARKET CONDITIONS!) (important caveat).

That means we can exploit this inefficiency to sell $KUJI high.

• Step 1: Sell $KUJI on KUJI/ATOM order book

But if $KUJI's price is high, what is $ATOM's price?

Um. The KUJI/ATOM order book doesn't list $ATOM's price.

OR.

DOES.

IT?

In my ATOM-arb article, I wrote how to compute $ATOM's price from the ratio and $KUJI's price:

$ATOM price = $KUJI price / ratio

So, running this computation on current market prices we have

• $ATOM price on KUJI/ATOM: $13.31
• ATOM/axlUSDC: $13.20
• ATOM/USK: $13.259

So, $ATOM's price is HIGHER on KUJI/ATOM order book. And we're buying $ATOM from the $KUJI we're selling.

Oops, buying higher. Hm. 😅

But now we have $ATOM. What do we do?

• Step 2: We find the ATOM/stable order book where $ATOM's price-quote is HIGHEST, and we sell there.

The trader's axiom: buy low/sell high.

In these market conditions, ATOM/axlUSDC has the higher $ATOM-price, 

...so we sell there.

Now, 

• Step 3: buy-back $KUJI to complete the arbitration can be complicated, depending on market conditions.

IF the low-quote is on the same KUJI/stable that you sold the $ATOM,

THEN simply buy-back the $KUJI on that KUJI/stable order book, and you're done.

That's the easy-arb.

BUT, in these market-conditions, we SOLD on ATOM/axlUSDC, but KUJI/USK has the lower $KUJI-quote.

SO! IN THAT CASE! You need to run 2 scenarios ('scenarii'?)

1. SWAP axlUSDC to USK on axlUSDC/USK, then buy KUJI on KUJI/USK

The axlUSDC/USK order book, or the @TeamKujira 💸🖨️:

OR

2. simply buy KUJI on KUJI/axlUSDC if the above swap is disadvantageous.

And this closes out the $KUJI-arbitration, using the KUJI/ATOM order book. 

That's the 'simple' $KUJI-arb-scenario, using the KUJI/ATOM order book, which arbs you MORE $KUJI FASTER. Why? the price-inefficiency of both $KUJI and $ATOM on the KUJI/ATOM order book.

That's one scenario.

There are actually TWO more scenarios ('scenarii'?) here.

1. It's $ATOM's price that is (much) higher on the KUJI/ATOM order book, or $KUJI's price that is much lower. In that case, you'll be wanting to arbitrate $ATOM, then.
2. It's BOTH $KUJI AND $ATOM's price that are (much) higher.

For 2., then YOU get to pick which one to arb.

I've walked though the reasoning and 'magic' behind arbing either $KUJI or $ATOM on the KUJI/ATOM order book.

You: You talk alot, geophf.

me: You sound like Narrator.

Narrator: ...wut? 😤

Now let's step through an actual arb and see the reasoning-in-action/poetry-in-motion.

Arbitration Walkthrough

1. I see $KUJI-price is higher on KUJI/ATOM than on the KUJI/stable order books. So I sez t'me-self: "SELF!" ('cuz that's what I say to myself when I'm talking to myself) "SELF!" I sez, "let's arb $KUJI!" 

So, I place a sell-order.

Okay, now I have $ATOM.

2. I examine the ATOM/stable-prices. I see ATOM/axlUSDC has the high-price, so I SELL (limit-order) $ATOM on ATOM/axlUSDC

Buy low/Sell high. 

Let me share the transactions as I do them, for total transparency:

1. SELL 100 $KUJI for 4.93 $ATOM, quote: 0.0493 
2. SELL 4.93 $ATOM for 64.8985 $axlUSDC, quote: $13.16  

Okay, now I have $axlUSDC.

3. (maybe) Now, let's buy $KUJI to close out the arb, yes?

No.

We're at a crossroads here. I HAVE $axlUSDC, but the low price is on KUJI/USK.

SO!

3. I SWAP $axlUSDC for $USK

3. SELL 64.9 $axlUSDC for 63.1 $USK, quote: 0.972 

That order hits. And, you see I have a bunch of orders that hit on the axlUSDC/USK order book, or, as I call it: 💸🖨️.

I collect these orders in one fell swoop.

Please read my article on axlUSDC/USK-arbitration.  

Finally,

• step 4: Buy KUJI to close-out the arbitration.

4. BUY 101.6 $KUJI for 63.1 $USK, quote: $0.621 

ROI: 1.6% 💥

Discussion/FAQ

Q: "1.6%?" you say. "Meh." you say, "I'm doing better on the LPs!"

A: You're doing better APRs on the LPs, yes, but this is ROI. I made 1.6% in ONE MORNING! If I do one of these per day for a year, I've made 300%+ as an APR.

That's the thing: I arb at my pace.

Q: Can anything go wrong?

A: AB-SO-LUTE-LY! If the markets change during your arbitration, you can end up on the losing side of that equation, even: big time. That's why you want to do your arb as expeditiously as possible.

Start your arb; finish your arb quickly.

Summary

The KUJI/ATOM order book is this magical thing: you can arb either $KUJI or $ATOM OR BOTH! ... depending on market conditions.

I suggest stepping through this HOWTO with a small arb. Get the hang of it.

You'll find the KUJI/ATOM order book to be an useful tool.