The risk of pivot-arbing ETH

Let's talk about arbitrating $ETH with 'pivot-tokens' for a sec.

This in regard to L2s these days VASTLY improving their utility as arbitrage domains: tx-fees are less than 1¢ now, and, unlike the altchains, the L2s have volume.

LOTS of volume, protecting price-during-trades.

The PROBLEM with arbing $ETH with protocol tokens is this: every protocol token v. $ETH is in descent.

So, the direction is to swap $ETH for the protocol token, but if $ETH continues to rise and the pivot token stagnates, this is a very bad swap.

So, that's the problem.

What's the solution?

Select tokens as pivots that are tokens of value.

If we look at token prices vs. $USD we see something different. These tokens are not down-only in price. 

So what if they aren't down-only in price? What does that do for us?

That's why I run simulations: to answer those exact questions.

When I saw the EMA20 vs. the ratio gave me more $ETH over time than what I started with, THAT's when I knew I could use TOKENS OF VALUE to pivot.

Arbitrage is simple, ... maybe?

Look: with charts like these, 'throwing away $ETH' swaping to the pivot token, is concerning, ...because it is a real possibility.

You totally can lose all that $ETH you swapped away.

Then why do I take this risk?

Because the risk has paid off.

• The risk doesn't pay off today.
• The risk doesn't pay off this week.
• Sometimes, the risk doesn't pay off this month.

That's hella scary, folks.

But when it does pay off, and I walk away with 1.5 $ETH from a 1 $ETH pivot-arb, ...

Guess who's discoing on the dance floor?

Me.