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.
