Peg Arbitrage Mechanism
Last updated
Last updated
Currently, there is a trading strategy that users can employ to capitalize on the discrepancy between the market price of USDX and its true value:
Cross Market Arbitrage: engaging in buy or sell transactions of USDX with the protocol’s mint & redeem contract whenever the price of USDX deviates from its pegged value of $1.
Key considerations include:
USDX is entirely backed by the protocol’s reserve assets.
USDX can be minted and redeemed on demand, allowing approved participants to seamlessly transition between USDX and their digital asset of choice.
The valuation and quantity of the collateral backing USDX remain stable, unaffected by price volatilities or dislocations across any Centralized/Decentralized Spot Market, Automated Market Maker (AMM) Protocols, and beyond.
Even in turbulent markets leading to liquidity crunches, the collateral value supporting USDX remains stable.
This approach permits any authorized individual to mint or redeem, benefiting from the price/quantity discrepancy between the minting/redeeming rate of USDX with usdx.money and its trading price in external markets. External markets encompass both centralized and decentralized spot markets like "USDX/USDC" and AMM platforms such as Uniswap or Curve.
Should USDX be undervalued in an external market compared to usdx.money, a user could:
Buy 1x USDX at $0.95 using USDT or USDC.
Redeem 1x USDX at $1.00 through usdx.money, receiving USDT or USDC in return.
Realize a profit.
Conversely, if USDX is overvalued in the external market compared to usdx.money, a user could:
Mint USDX by depositing USDT or USDC with usdx.money.
Sell newly minted USDX for more than $1.00 in USDC.
Realize a profit.
