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 backed strictly by the protocol backing assets.
USDe is able to be minted & redeemed on demand by authorized, whitelisted users. This means that at any time, approved users are able to ramp in & out.
- about 0.50% of backing assets are typically held in stablecoin form and available in the Minting Smart Contract to enable on-demand redemptions. This balance is systematically replenished from the 4% of the backing assets of USDe held in stablecoins that are readily available from multiple custodians.
The value & amount of USDe's underlying backing is generally unaffected by any dislocations or rapid movements of price across any Centralized/Decentralized Spot Market, AMM Protocols, etc., though fluctuations in those markets may cause temporary dislocations in the secondary market price of USDe as the market's "reference assets" for the target peg.
The value of the reserve underpinning USDe is generally 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 directly, a user could:

Buy 1x USDe at 0.95 from Curve using USDT.
Redeem 1x USDe at 1.00 from Ethena receiving USDT.
Profit.

If USDe is worth MORE in an external market than from Ethena Labs, a user could:

Mint USDe using USDT from Ethena.
Sell the USDe in the Curve pool for > 1.00 for USDT.
Profit.

Last updated 3 months ago

Trade Strategies

It's important to keep in mind:

USDe is backed strictly by the protocol backing assets.

USDe is able to be minted & redeemed on demand by authorized, whitelisted users. This means that at any time, approved users are able to ramp in & out.

about 0.50% of backing assets are typically held in stablecoin form and available in the Minting Smart Contract to enable on-demand redemptions. This balance is systematically replenished from the 4% of the backing assets of USDe held in stablecoins that are readily available from multiple custodians.

The value & amount of USDe's underlying backing is generally unaffected by any dislocations or rapid movements of price across any Centralized/Decentralized Spot Market, AMM Protocols, etc., though fluctuations in those markets may cause temporary dislocations in the secondary market price of USDe as the market's "reference assets" for the target peg.

The value of the reserve underpinning USDe is generally unaffected by the removal of liquidity in volatile markets.

1. Cross Market Arbitrage

If USDe is worth LESS in an external market than from Ethena directly, a user could:

Buy 1x USDe at 0.95 from Curve using USDT.

Redeem 1x USDe at 1.00 from Ethena receiving USDT.

Profit.

If USDe is worth MORE in an external market than from Ethena Labs, a user could:

Mint USDe using USDT from Ethena.

Sell the USDe in the Curve pool for > 1.00 for USDT.

Profit.