Some of the biggest assets of cryptocurrencies are Arbitrage play.. Some of them lay in clear visibility, but were too difficult to carry out. Others were hidden.
Think about Arthur Hayes and Sambankman Fried. Arbitrage was exactly the way they were able to fund the launch of their respective exchanges. But since then, the trajectories of the two founders have gone in quite different directions.former Admit sin This year it violates the US Bank Secrecy Act, the latter Appeared as Buyer of last resort in the latest crypto meltdown.
Still, they are both clinging to buying cryptocurrencies low and selling them high elsewhere.Bankman Fried Made a profit Korean so-called Kimchi PremiumAnd Hayes earned his money from Similar premium In mainland China.
Recently, there is another potentially favorable arbitrage transaction.Currently, the value of the token Lido Staked Ethereum (stETH), which was previously traded 1: 1 with the price of Ethereum, is Lost pegs to ETH..
At the time of writing stETH Worth $ 1,037, ETH Is $ 1,081 and is a 4.7% discount on stETH. This discount has been known for some time, but why aren’t any of the Hayes and Bankman Fried cryptocurrencies scooping up this neat little deal?
Sure, it should be easy to buy a discounted stETH, exchange it for regular ETH, and put the difference in your pocket, right?
Well, it’s not accurate.It’s because of the way Lido FinanceThe stETH provider works.
Lido Finance Mechanism
Lido is a staking service that allows users to deposit Ethereum, receive stETH in return, and earn a small percentage of the yield.Lido then receives those deposits and adds them to Ethereum Beacon chainIn essence, a parallel ghost version of Ethereum’s original Proof of Work version (although Proof of stake).
Lido has become the market leader for providing this.
Dune Analytics shows that Lido is currently in charge of 31.5% of the deposits in the Beacon chain. In other words, Lido’s smart contracts contain more than 4.1 million ETHs. That’s a whopping $ 4.4 billion today.
There is no redemption mechanism currently available on how the platform is generating that yield (that is, by betting on what will eventually become Ethereum 2.0). Familiar arbitrage traders cannot return their stETH deposits to the first ETH deposited.
from Lido: “Lido allows you to transfer, exchange and use” bet ETH “before the start of Phase 1.5, but you can exchange bet ETH for ETH only after the transfer is enabled in Ethereum 2.0. “Bet ETH” is created on a 1: 1 basis for all ETH bet through Lido and is burned when the “Bet ETH” is redeemed for ETH. “
This is the case of stETH, isn’t it?The market is simply expected to shrug this depeg as yet another Experiment that failed in DeFi??
Not perfect. In fact, for some Ethereum bulls, it could even offer another opportunity to make a big bet on the successful launch of Ethereum 2.0. Note: “You can only redeem your bet ETH for ETH if transfer is enabled in Ethereum 2.0.”
So, in the meantime, you can scoop up all the virtually discounted ETH while waiting for the moment you can finally redeem 1: 1.
Bet on merge
It may sound as easy as an early capture of Kimchi Premium, but it requires a lot of sutras.
When making such a bet, you assume the following: 1) the long-awaited Ethereum upgrade actually happens, 2) Lido is still present at that time, and 3) ETH prices are merged. It hasn’t plummeted by that time, it runs out of potential arbitrage profits.
Today, Ethereum is still four digits. There may be three tomorrow.
Another consideration is opportunity cost. In making this bet, you also assume that there are no more lucrative bets to be made elsewhere. While waiting for the redemption that Ethereum said, you may miss the next big thing.
Another similar bet you can make is on the currently traded Grayscale Bitcoin Trust. Bigger 30% discount To the underlying asset.
However, the bet is basically betting on the Securities and Exchange Commission. Finally approved BTC Spot ETF.. Who knows when that will happen?
When it comes to merge events, Ethereum developers Say September-for now.
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