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.

#cryptocurrency pop-answer: FIN order book volumes

#cryptocurrency pop-answer to FIN order book volumes:

1. KUJI/axlUSDC has the most volume, 44.6k on 2023-01-10

Bonus: it is also, and only, order book that has more volume than ATOM/axlUSDC, (23.2k on 2023-01-10)

volumes scraped and processed by ./rusk ('risk in Rust') 

Avalanche: is she dead, Captain?

A reader asked me my view on Avalanche, seeing that it's dying and dead?

My answer is as follows.

Fair, and unflinching, question, m8.The question, for me, is:

1. Does the blockchain have an active community?
2. Does the blockchain have a variety of dApps that:
1. do what I want
2. provide circulation of currency?
3. Can I move liquidity onto and off of the blockchain securely?

1. eh. Don't know. Don't care. Avalanchæns aren't making a big splash like the Lunatics do, but I will say this.

The App-dev community are passionate about their protocols, vociferously so. They get right back to me, and are right in my face, lightning fast.

I respect that.

So that means the protocols aren't dead. The blockchain, in my view, are the protocols, so that means the blockchain isn't dead.

So, 2. protocol.

• @traderjoe_xyz just had a major overhaul with their Liquidity Book
• @yieldyak_ $yy-tokens are through the roof
• @GMX_IO is multichain, yes, but their tokens are doing great on Avalanche, too.
• $sAVAX just had a lull, but then spurted today, so: yay!

I mean, the counterargument is that there are a lot of dead protocols on Avalanche, and that Avalanche isn't dying, it died, what? 6 months ago, and you can make a case for this position.

But the counter-counter argument is are the existing protocols sufficient? I say: yes.

3. There's a subtext to inter-chain, and that's the Terra and Harmony and Osmosis hacks. All three affected me.

So moving liquidity onto and off the the chain – SAFELY – is paramount to me. 

3. There's a subtext to inter-chain, and that's the Terra and Harmony and Osmosis hacks. All three affected me.

So moving liquidity onto and off the the chain – SAFELY – is paramount to me. 

Avalanche, with the 'coven' of validators (you don't know who will validate a transaction), is one of the safest chains to bridge liquidity.

And fastest.

And cheapest.

Now, for TVL going down, that's a vicious circle, innit?

Token price goes down, driving TVL down, people sell because token price down, causing token price to go down.

I think we're at a new plateau now? Things seem to have settled from the panic-sell-phase, anyway.

So, have I lost money on my Avalanche stake? You betcha! Lots! You see that in my daily report.

Am I still staked into Avalanche heavily?

You betcha! You see that in my daily reports.

So, ... but this begs the question, for you, specifically: if not Avalanche, then: which blockchain, then?

There are several good ones.

Several.

So you can do well in several places.

But, frankly, most blockchains have piss-poor infrastructure, unsafe, barren wastelands.

I'm not give to call out bad blockchains: I don't have the time to waste on what doesn't work. What I have time for is what's proven, what's stable, what's secure, and what I can BUIDL on.

Avalanche fits those criteria. A few others do, too.

Most don't.

Really, it boils down to what works and what you're working in right now.

A lot of blockchains say: "Gee whiz! In six months we'll ..."

No, thank you: I've seen your 'in six months' for two years running.

Avalanche has what I need now.

And that's what I think about Avalanche.

Rust pop-quiz: risk assessor

Rust pop-quiz.

You can put in a limit order anywhere on FIN, but how certain are you that it will get filled (in a reasonable time)?

Create a risk-measure per order book per order size and price.

I want to sell 100 $ATOM on ATOM / OSMO at 15 OSMO per.

Is that risky? How?

• answer: ./top_order_books computes volumes-per-order book 

The MIM-proposition

Let's take a look at the shorting $MIM-proposition. If you're not familiar with this approach, @38_2_percents mentioned this thread to me.

So, I'm going to be reductionist about the thread.

"I made 7 figures" sounds like 100% gain from a 0% risk, but, following looping approach above, it's more like this:

• if I were to invest, say, $481 in stables, using loop-approach, I'd make, at 100%-depeg GROSS $1,413.45.

But 2x net gain is the upside.

What're the downsides?

• Liquidation, particularly if you're going to squeeze water from this rock.
• Nothing happens, so you've set aside your money for eh-returns.
• Nothing happens, and you're paying 14% borrow rate.

These are the risks.

So, 'make 7 figures'?

No. Unless you already have at least half 7 figures invested in this scheme.

2x return sounds good?

No. Because: I can do this elsewhere in a defined time. This timeframe is undefined.

Can you lose? Yes: possible liquidation and definite 14% borrow rate.

Now: the $481-question.

Am I doing this?

...yes?

I wish I had $1M to throw around to make $2M, but I don't, and I AM NOT RISKING my portfolio for this play.

A short should be a SMALL part of your investments, and this play, here, is a SMALL play.

I'll play it, sure, and win.