Thread by @fluffy_trex

I want to run through a more detailed explanation of arbing lsd assets because I post about it a bit, and there are a bunch in the #cosmos right now. Anyone can do it, they’re fun to look for, and great for stacking. #terra $luna 🌗

A 🧵 (1/12):

2/12 First, know the “true value” of your lsd. I’ll use $bluna in this example. Go to @BackBone_Labs gravedigger.backbonelabs.io and look at unbonding rate for bluna. Right now it’s 1.033459 $luna. Meaning if you unstake one $bluna you will receive 1.033459 $luna in about 22 days.

3/12 Now, thanks to @tfm_com dex aggregator which has limit order composability, I can set limit orders on the pair bluna/luna. Whenever any dex offers the arb rate we want, it will execute. 💥

4/12 To set a limit order for arbs, decide what % arb you want to execute. Let’s say, 2%, which equates to about 34% apr if you complete the loop. So 98% of 1.0335 (the ‘true value’ of $bluna right now) is 1.01283.

5/12 Now we set our limit order: buy $bluna at 1.012383 $luna. The order page tells me bluna needs to drop 1.5% from where it is now to execute (nice tool tip 👌). Second picture is after I signed and you see my order in the book.

6/12 Once it triggers, you can either go to the gravedigger app to complete the arb and get your 2% bonus $Luna in 22 days- Or you can wait for a few days and see if the pool balances out.

Why do this?

7/12 Even if the pool balances a little and you can sell the $bluna back for 1% gain after 1 week, that’s a 52% apr arb (even better than the original!) but not guaranteed you’ll have that opportunity.

8/12 One of the downsides of this strategy is that your $Luna is stuck in the limit contract until it executes or you cancel it. So, you may be “missing gains” because you’re not using your assets elsewhere.

9/12 For ex, in the bluna-Luna @astroport_fi LP you’d earn +28% apr. In a 4 wk period you’d earn 2.14% apr on your $Luna. So, in order for our arb strategy to make sense, we need it to trigger in less than 1 month- otherwise it would have been better to stick it in the Astro LP.

10/12 So let’s see how often $bluna has a 2% arb opportunity. Tab over on the @tfm_com limit page to “chart” for the pair your arbing:

11/12 Ok looks like in the past two months there have been two 3% arb opportunities. Meaning, we may be waiting for about a month for our arb limit to trigger. Maybe it’s not worth it… or maybe we should change it to 1.5% or 3%?

12/12 It’s all about finding the best strategy for the moment. Things change fast and this is a good tool to keep in your belt.

There are more intricacies to discuss here but I’ll leave it at that!