- An Ethereum whale uses a lucrative arbitrage approach with staked ETH (stETH).
- The investor profits from the price difference between ETH and stETH.
- The arbitrage method is designed for large-scale investors with substantial capital.
A recent analysis by on-chain expert Lookonchain detailed a lucrative arbitrage approach employed by an Ethereum whale with staked ETH.
Per @lookonchain, the large-scale investor swaps ETH for stETH on a decentralized exchange at a marginally higher price and then exchanges the stETH back to ETH on a 1:1 ratio through Lido. This process enables the investor to profit from the price difference between ETH and STETH.
As an illustration, the large-scale investor exchanged 1,370 ETH for 1,370.3351 stETH using the 1inch platform, incurring a transaction cost of 0.0061 ETH (equivalent to $10). The subsequent conversion of the stETH back into ETH resulted in a gain of 0.329 ETH, which translates to a monetary profit of $540.
Although the return on a single trade may not be substantial, executing this daily with 1,370 ETH could yield an annual profit of 118 ETH, equivalent to $194,000. This equates to an annual percentage yield (APY) of 8.6% when arbitraging the ETH/stETH peg.
The trader can enhance their returns when the ETH/stETH ratio deviates further. In May 2022, the ratio decreased to 0.94, which facilitated a profit of $87 for every 1,370 ETH transaction.
The arbitrage method is inappropriate for individuals with restricted capital because of the related transaction expenses. This tactic is designed for large-scale investors, often called whales, who have the financial capacity to bear the substantial costs.
Arbitrage is a common trading tactic in numerous financial markets, including cryptocurrency. This method exploits the price discrepancies of the same asset across multiple platforms or exchanges. Essentially, it entails buying an asset at a reduced price on one platform and selling it at an elevated price on another, thus deriving profit from the price difference.
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