HOWTO arb KUJI ... without arb'n KUJI

HOWTO arb $KUJI

... without arb'n $KUJI.

Preamble

Let's talk arbitration for a hot second. What is it?

Arbitration is a set of transactions: you start with x tokens, let's say $KUJI, and, after the transactions are complete, you end with x+ε tokens.

If you sit down and give this a think, this is the golden arrow, frenz. 🏹

Why do I say "arbitration is the golden arrow"?

Because it's what you want.

You want to make money, and not lose money, right? Arbitration is one of the simplest ways to do this, because if you have x, then you have x+ε, then, voilà, you've made money AND eliminated volatility!

THAT's why I like arbitration so much!

THAT's why you call me the space cowboy.

... sorry: the 'Arbitration KANGz! 👑' 😎

And I'm going to give this golden arrow, ...

on a silver platter.

Why?

Because I love you.

Now, SIT UP and PAY ATTENTION!

So we all can WIN THIS THING!

Now: arbitration is low(er)-risk than other kinds of trades, but it's not 'no risk.' 

Also, arbitration requires you wrap your head around what it is.

Also-also, arbitration isn't flashy nor grandiose: it requires patience, smarts, and more patience.

For the risks, I'll point those out as we go along, AND! risk colors this HOWTO: I start with the riskier (most common) kinds of arbs, but then we'll go from riskier to less to even less.

The neat thing? 'Less risk' doesn't necessarily mean 'less return.'

But we'll get to that.

Let's go over each type of arb that I know in turn. I'm going break this down into three types of arbs, and I'm going to use $KUJI as the working example.

So, I'm going to talk, I'm going to show, using examples.

So, let's roll up our sleeves, and get into these, eh, frenz?

When I say "let's," I mean: you do this. You actually do these exercises, and find out if arbs work for you, or if they don't, and find out which types of arbs you like, and which ones you don't.

That's how I learned arbitration: others told with me what they did, then I did it.

Let's look at each arb-type in turn.

First up: 

KUJI -> x -> KUJI arb

Usually this is KUJI -> stable -> stable -> KUJI

But stables and which order?

For that, we have to look at the FIN order books. 

What do the order books say now?

KUJI/axlUSDC: $0.911

KUJI/USK: $0.903

Perfect! That is to say: we want to sell high; buy low and the order books present this scenario perfectly.

Let's do an walk-through with an 100 $KUJI-arb.

1. SELL 100 $KUJI at 0.898-per (yields 89.73 $axlUSDC)

2. SELL 89.73 $axlUSDC at 0.9651-per (yields 86.536 $USK)

3. BUY 100.2 $KUJI from 86.536 $USK

DONE! 

DONE! But there's a problem with this arb, specifically, and a risk with this type of arb, in general.

The problem is 0.2% ROI isn't an arb I'm interested in. If it's not at at least a 1% gain, I'm spending a lot of energy for almost no gain.

Not. interested.

The risk, in general, with this type of arb is this.

You sell the $KUJI for the stable. $KUJI skies. You make no gain, in fact, you lose your $KUJI by 10%, 20%, 30%. That's not an arb I'd like to be involved with, but, I must admit, this has happened to me more than once.

Now, this risk can be mitigated and this problem can be dealt with, and I've done both mitigations.

The mitigation?

Instead of placing an order, waiting for it to fill, then placing the next order, all the way to end of the arb, place all the orders at the same time.

The faster you fill all the orders in your arb, the less exposed you are to market fluctuations that can ruin your arb.

Credit to @technologypoet for giving me this idea by simply asking the question: "Do you place orders one after the other, or all at once?"

I had always, up to the point, placed one order after the other, but her question made me ask: "why? Why not place them all at once?"

Now the problem, the 0.2% ROI, I mitigate by placing my limit orders further from market price, thus increasing ROI. The problem with THAT is then the order takes longer to fill, and if the markets run away from you, 'longer to fill' may mean 'months' or 'never.'

It's happened.

Other KUJI -> x -> KUJI arbs

The $KUJI -> x -> $KUJI arb doesn't have to be stables. It could be:

KUJI -> LUNA -> ampLUNA -> USK -> KUJI

That's an arb, and looking at just this example, you see that you can get really creative with this kind of arb.

I do.

Take, for example, this arb I just completed.

2023-05-25 entry: 50 KUJI -> 47.7 LUNA, SELL at 0.954

2023-05-28 exit: 47.7 LUNA -> 62.9288 KUJI, BUY at 0.758

ROI: 25.86%, 4 days, annualized to 3.2k% APR

This is telling. The arb took three days, so: patience, but 3.2k% APR?

Yes, please, and thank you! 😎

KUJI -> ampKUJI -> KUJI arb

(this, of course, applies to any token that has an associated LSD ('liquid staking derivative') and order book that supports this trade).

1. BORROW 100 $KUJI from 300 $axlUSDC on Ghost

(because you arb with OTHER PEOPLE's MONEY!)

2. Next, with the 100 (borrowed) $KUJI, place a buy order on the ampKUJI/KUJI FIN order book. Looking at the market, I place my buy at 0.9556 (just above a large buy order, front-running the bigger fish in this pond).

3. When that order fills, I claim the $ampKUJI, examine the market, the place a SELL order of the $ampKUJI, completing the arb.
   
   
   In this case the arb will be around 1%. I'll then pay-back the borrow and then walk away with my 0.9 $KUJI, given to me with OTHER PEOPLE's MONEY.

Folks, I LIKE this arb, a lot. It's so durn safe and so flexible.

This is how and where I started my "Infinite $ONE Well" off a tip to me to look at the wide gap between $stONE and $ONE, and now I'm doing that with $FTM and $sFTMX.

This works so well with so many tokens.

Not only that, but, because this kind of arb is between a token and its LSD, the chance that these two tokens diverge, leaving you holding the bag, is infinitesimal compared to a token-vs-stable divergence, that happens WAY more often.

Arb'n LSDs is just so YUMMY for me! 😋

That said, and I AM grateful to @eris_protocol for making this arb possible, but the $KUJI-arb is my least favorite LSD-arb.

$LUNA? Fantastic! $FTM? It has issues, but it's workable.

But $KUJI's LSD is ALMOST pegged with well nigh no wiggle room for me to play arbs with.

That's not a bad thing, that's actually an indicator of a healthy, vibrate ecosystem, with a LOT of volume trading $KUJI to $ampKUJI and back.

That the arbiteur's job: keeping a token on peg, and $KUJI-$ampKUJI are TIGHTLY on peg, making arbs not as easy as with other tokens.

Okay, now,

無 $KUJI arb

The 'no-$KUJI'-$KUJI arb.

This is an interesting one for me, because it's weird (1) and it's the safest-...ish (2).

What is the 無 $KUJI arb and how does this arb work?

You arb $KUJI without arb'n $KUJI.

That's what it is.

How to do this?

You arb something, because liquidity is liquidity.

1. Borrow 100 $USK against 400 $KUJI

2. arb the $USK on axlUSDC/USK board

3. payback the borrow
4. with the overage, buy $KUJI

That's your 無 $KUJI arb.

The beauty of this arb is that you're protecting the token arb'd. AND no matter what the volumes are for the arb'd token, you can arb with a high-volume token (such as $USK, in this example), so your arb is well-nigh a success already, and then you simply buy with the overage.

Now, I arb $KUJI in this example, but that example is boring: $KUJI has high volume on FIN, and so does $USK.

But what if I arb another $USK-minter, like, say: $ETH or $BTC.

On @TeamKujira, neither $ETH nor $BTC have high trade volumes.

But.

$USK.

Does.

"But how am I going to buy $ETH or $BTC if those order books are low-volume, geophf?"

Glad you asked.

There's this little LP-based DEX called @osmosiszone that you can bridge liquidity to and from.

The @TeamKujira FIN order books against you? They're with you on @osmosiszone. 

Think about it. $ETH, $BTC, $DOT, $BNB: these are $USK-minting tokens that aren't easy to come by, and aren't – up to now – easy to arb on @TeamKujira FIN.

Now, frenz, they are.

You want more of token X?

Arb token X with one of these three arb-tactics.

I love you.