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Peg Arbitrage Mechanism

There is one presently available trade strategy available to users to profit from a price dislocation of USDe in external markets from what it is actually worth:
Cross Market Arbitrage: purchasing or selling USDe into the protocol mint & redeem contract when USDe price has diverged from $1.

Trade Strategies

It's important to keep in mind:
  • USDe is fully collateralized strictly by the protocol backing assets.
  • USDe is able to be minted & redeemed on demand. This means that at any time, approved users are able to ramp in & out to a digital asset of their choice.
  • The value & amount of USDe's underlying collateral is unaffected by any dislocations or rapid movements of price across any Centralized/Decentralized Spot Market, AMM Protocols, etc.
  • The value of the collateral underpinning USDe is unaffected by the removal of liquidity in volatile markets.

1. Cross Market Arbitrage

This strategy enables any user approved to mint/redeem to profit from the difference between the price/amount users' are able to mint/redeem USDe with Ethena & the value of USDe in an external market. An external market includes all centralized & decentralized spot markets such as "USDe/USDC" and AMM Protocols such as Uniswap or Curve.
If USDe is worth LESS in an external market than from Ethena Labs, a user could:
  1. 1.
    Buy 1x USDe at 0.95 from Curve using USDC.
  2. 2.
    Redeem 1x USDe at 1.00 from Ethena Labs receiving ETH.
  3. 3.
    Sell the received ETH for USDC on Curve.
  4. 4.
    Profit.
If USDe is worth MORE in an external market than from Ethena Labs, a user could:
  1. 1.
    Mint USDe using ETH from Ethena Labs.
  2. 2.
    Sell the USDe in the Curve pool for > 1.00 for USDC.
  3. 3.
    Buy ETH using USDC on Curve.
  4. 4.
    Profit.
Last modified 1mo ago