2) So, I *do* think AMMs make some sense for mean-reverty spreads.
Like some premiums.
Also, like USDC/TUSD/etc. (Curve!)
Like some premiums.
Also, like USDC/TUSD/etc. (Curve!)
3) But you could do the same thing on a DEX.
the tricky thing here is that the two cases @cyounessi1 presents aren't quite the same.
Say there are two things--A and B--and over time A/B --> 1 (i.e. they converge).
In his case, treasuries and their futures.
the tricky thing here is that the two cases @cyounessi1 presents aren't quite the same.
Say there are two things--A and B--and over time A/B --> 1 (i.e. they converge).
In his case, treasuries and their futures.
4) In the CEX case, Cyrus has these markets:
-- A / USD
--B / USD
In the AMM case, Cyrus as this pool:
--A / B
The reason he gets the "better" result in the AMM case is because it listed the right market.
-- A / USD
--B / USD
In the AMM case, Cyrus as this pool:
--A / B
The reason he gets the "better" result in the AMM case is because it listed the right market.
5) But in the CEX case--
--they could have just listed a market of A / B, and then his firm could have put out lots of limit orders to provide--buying A/B @ 0.999, and selling A/B @ 1.001
--they could have just listed a market of A / B, and then his firm could have put out lots of limit orders to provide--buying A/B @ 0.999, and selling A/B @ 1.001
6)
And in the AMM case, if they instead had A/USD and B/USD pools, then when things moved the LPs would get picked off in both at the same time.
They key here is having a single market that expresses the mean reversion rather than a two legged trade that is latency dependent.
And in the AMM case, if they instead had A/USD and B/USD pools, then when things moved the LPs would get picked off in both at the same time.
They key here is having a single market that expresses the mean reversion rather than a two legged trade that is latency dependent.
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