Some simply bought and held, patiently waiting for prices to rise, while others engaged in arbitrage, buying in one location and selling in another.
For USDT, arbitrage required over 100,000 USDT and accreditation as an investor, creating a significant entry barrier. However, the Liquid Loans protocol has democratized this process, enabling anyone with a small amount of USDL to participate in redemptions.
Here's a step-by-step guide on how to profit from arbitraging USDL.
A price discrepancy for USDL would technically be any value under $1.
However, there are a few things to consider:
Although arbitrage bots help with this nearly instantly, no liquidity pool has the same price for any asset.
For example, a centralized exchange may list USDL and keep its price fixed in their order books at $1. If you look on DexScreener, it might show that USDL has temporarily depegged to allow for an arbitrage opportunity. However, just because the prices on some decentralized exchanges have dipped, does not mean you will get that deal in other liquidity pools or centralized order books.
Thus, it is important to make sure you choose a liquidity pool that gets you the lowest price for USDL.
Once you have found a price discrepancy, go to the decentralized exchanges or DEX aggregator and buy USDL.
PulseX is used in this example, but go wherever you get the lowest price for USDL.
Note: Due to Price Impact during the trade, my original value of $68,200 will yield me $68,000. That’s roughly $200 and a 0.29% loss. Now, since the redemption fee is still 0.5%, I will need a price below 99.2 cents in order to profit from arbitrage.
Then Click “Confirm Swap”.
Then Click “Confirm” inside of your wallet.
Follow this super easy guide to redeem USDL for PLS.
Remember to take note of the redemption fee. Although it is usually 0.5%, it can be as high as 5%. If it is 5%, you will need an average cost of USDL under 95 cents in order to profit.
Since I was holding PLS before this transaction, I am left with PLS after redemption and do not need an additional transactions.
However, if you sold CST or a bridged stablecoin to buy cheap USDL, you can sell back into that asset using PulseX or another DEX.
Remember: Just because USDL is under 1 USD does not mean you can turn a profit on it.
You must consider prince impact and slippage. That is, how much your order moves the price against yourself and how much the prices of the assets you hold move during your order.
You must also consider the redemption fees when calculating the margins of your arbitrage.
With that said, look out for USDL under 1 USD, it could be the easiest money of your life!
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Disclaimer:Please note that nothing on this website constitutes financial advice. Whilst every effort has been made to ensure that the information provided on this website is accurate, individuals must not rely on this information to make a financial or investment decision. Before making any decision, we strongly recommend you consult a qualified professional who should take into account your specific investment objectives, financial situation and individual needs.
Connor is a US-based digital marketer and writer. He has a diverse military and academic background, but developed a passion over the years for blockchain and DeFi because of their potential to provide censorship resistance and financial freedom. Connor is dedicated to educating and inspiring others in the space, and is an active member and investor in the Ethereum, Hex, and PulseChain communities.