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Ethereum whales employ a profitable arbitrage strategy involving staked ETH (stETH).
The strategy involves exchanging ETH for stETH on DEX at a small premium, and then exchanging stETH for ETH at a 1:1 ratio through Lido.
The whale exchanged 1,370.3351 ETH for 1 stETH on 1,370inch, making a profit of 0.329 ETH ($540) after deducting gas fees.
An on-chain analyst named Lookonchain recently outlined a profitable arbitrage strategy used by Ethereum whales involving staked ETH (stETH).
According to @lookonchain, whales exchange ETH for stETH at a small premium on DEX, and then exchange stETH for ETH at a 1:1 ratio through Lido. This allows whales to pocket the price difference between ETH and STETH prices.
For example, a whale swapped 1,370.3351 ETH for 1 stETH on 1,370inch, paying 0.0061 ETH ($10) in gas fees. Swapping stETH for ETH netted 0.329 ETH ($540).
While the returns on a single trade are not huge, trading 1,370 ETH per day would generate an annual profit of 118 ETH ($194,000). This means an annualized rate of return based on ETH/stETH peg arbitrage of 8.6%.
When ETH/stETH decouples further, traders can amplify returns. In January 2022, the ratio dropped to 0.94, earning $87 in profit for every 1,370 ETH traded.
Due to the associated transaction costs, arbitrage strategies are considered unsuitable for people with limited funds. This approach seems to be tailor-made for whales - large investors who can afford high fees.
Arbitrage is a widely used trading strategy across different financial markets, including the cryptocurrency space. This method exploits the price differences of the same asset on different platforms or exchanges. Essentially, it involves buying an asset at a lower price on one platform and then selling it at a higher price on another platform, generating a profit from the price difference. #公链生态 #一起来跟单 #注意资金安全 #BTC #ETH $BTC $ETH $BNB
