Peg Arbitrage Mechanism
There is one presently available trade strategy available to users to profit from a price dislocation of USDca in external markets from what it is actually worth:
Last updated
There is one presently available trade strategy available to users to profit from a price dislocation of USDca in external markets from what it is actually worth:
Last updated
Cross Market Arbitrage: purchasing or selling USDca into the protocol mint & redeem contract when USDca price has diverged from $1.
It's important to keep in mind:
USDca is backed strictly by the protocol backing assets.
USDca is able to be minted & redeemed on demand by authorized, whitelisted users. This means that at any time, approved users are able to ramp in & out.
about 0.50% of backing assets are typically held in stablecoin form and available in the Minting Smart Contract to enable on-demand redemptions. This balance is systematically replenished from the 4% of the backing assets of USDca held in stablecoins that are readily available from multiple custodians.
The value & amount of USDca 's underlying backing is generally unaffected by any dislocations or rapid movements of price across any Centralized/Decentralized Spot Market, AMM Protocols, etc., though fluctuations in those markets may cause temporary dislocations in the secondary market price of USDca as the market's "reference assets" for the target peg.
The value of the reserve underpinning USDca is generally unaffected by the removal of liquidity in volatile markets.
This strategy enables any user approved to mint/redeem to profit from the difference between the price/amount users' are able to mint/redeem USDca with CAMP & the value of USDca in an external market. An external market includes all centralized & decentralized spot markets such as "USDca /USDC" and AMM Protocols such as Uniswap or Curve.
If USDca is worth LESS in an external market than from CAMP directly, a user could:
Buy 1x USDca at 0.95 from Curve using USDT.
Redeem 1x USDca at 1.00 from CAMP receiving USDT.
Profit.
If USDca is worth MORE in an external market than from CAMP Labs, a user could:
Mint USDca using USDT from CAMP.
Sell the USDca in the Curve pool for > 1.00 for USDT.
Profit.
