Arbitrage Alert! TRUNK off Peg After Elephant Money Attack
A huge consequence of the attack is that the TRUNK stablecoin is off peg.
I am here to show you how you can both profit and help the platform if you are willing to wager on TRUNK returning to peg!
Arbitrage is buying and selling an asset in markets that have a price disparity. Here is an example:
- Buy 1kg of grapes for $4 at a supermarket
- A farmers market has grapes that sell for $6/kg
- Walk to the farmers market and sell 1kg grapes for $6
- Total profit = $2
Since TRUNK is currently worth less than $1, the arbitrage trade is simply buying TRUNK now and selling after TRUNK has returned to peg. No need to do anything else.
We can start to evaluate this trade by checking TRUNK’s current price discount. Below is TRUNK de-pegging after the Elephant Money attack:
TRUNK is currently worth $0.67 at time of writing.
If the price can get back to 1$, that is a potential profit of $0.33 per TRUNK,
In other words, a 50% arbitrage trade!
It is clear that you can profit if TRUNK returns to peg, but how does buying TRUNK now help the platform?
If we take a look at the Pancakeswap TRUNK/BUSD Liquidity Pool, we can see that it is grossly unbalanced:
Trading BUSD for TRUNK on Pancakeswap will add more BUSD to the pool and rebalance the LP in the right direction. Once the pool contains equal amounts of TRUNK and BUSD, the peg is restored!
In order to make this trade, you need to have conviction in Elephant Money. If you don’t think the peg will recover, do not make this trade. If you are willing to bet on the dev team, Elephant Money users, and arbitrageurs to push the price back to $1, then go ahead.
Full disclosure: I am making this trade with a small % of my portfolio. I am making a wager on the Elephant Money HERD. If you think this is a horrible idea, go ahead and make fun of me if it doesn’t work out!
Lastly, if you plan to use the Elephant Money Stampede Perpetual Bonds platform for the long term, this may be a massively advantageous time to buy in. If you are already buying TRUNK at $0.67, your effective APR in Stampede Bonds and staking gets a 50% boost, dollar-for-dollar. Let me show you how:
APR normally: 205% APR
APR buying TRUNK at 0.67 = Price appreciates to $1 which is ~50% gain = 205% x 150% boost factor = 307% APR!
Of course, buying TRUNK after the attack is taking a bet on the long-term platform health. If you cannot afford to take on this type of risk, do not do this.
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Thanks and have a nice day!