> With no slippage/spreads on dex's or cex's to be able to do this with any stablecoin? Pipe dream.
Slippage for an arbitrageur is price correction to the market. I made a math error in my comment: call money at 2.75% is less than a basis point a day. The trade makes money with no collateral.
I--me!--could call my broker and borrow $10mm at 5.75% (call money + 300 bps, because I'm not a billionaire) by lying and saying it wasn't for trading, buy 10 million Tethers for 0.9987, redeem them and pay back the loan the next day to turn an $11,425 profit.
I'm not going to do this. Because in that interval between buying and redeeming, an interval I'm sure would be marred by unnecessary delays--with my borrowing cost the trade breaks even between days 8 and 9--there is more than a 1 in 875 chance that Tether blows up [a]. (In other words, I'm betting, by not doing this trade, that Tether has no more than a few years to its name.)
[1] 1 / (11,425 / $10mm), the 11,425 being about $10mm - [$10mm * 0.9987] - [$10mm * {(2.75% + 3%) / 365} * 1 day]
Slippage for an arbitrageur is price correction to the market. I made a math error in my comment: call money at 2.75% is less than a basis point a day. The trade makes money with no collateral.
I--me!--could call my broker and borrow $10mm at 5.75% (call money + 300 bps, because I'm not a billionaire) by lying and saying it wasn't for trading, buy 10 million Tethers for 0.9987, redeem them and pay back the loan the next day to turn an $11,425 profit.
I'm not going to do this. Because in that interval between buying and redeeming, an interval I'm sure would be marred by unnecessary delays--with my borrowing cost the trade breaks even between days 8 and 9--there is more than a 1 in 875 chance that Tether blows up [a]. (In other words, I'm betting, by not doing this trade, that Tether has no more than a few years to its name.)
[1] 1 / (11,425 / $10mm), the 11,425 being about $10mm - [$10mm * 0.9987] - [$10mm * {(2.75% + 3%) / 365} * 1 day]