How Retail Investors Can Benefit From Crypto Arbitrage

As well as being an unparalleled time for global health, the last few years witnessed an unprecedented surge in retail investing in the stock market. The popularity in investing that arose from the history-making GameStop saga, is evident in a survey from Charles Schwab, the brokerage that now hosts 31.5 million retail clients and $6.9 trillion in assets thanks to the boom, which found that 15% of retail investors started investing in 2020. 

As part of the surge in retail investing interest, many investors have been dipping their toes into the world of arbitrage. The trading strategy, which involves buying and selling an asset in two different markets in order to take advantage of minor differences in prices, is a popular choice amongst investors since it essentially allows them to make a quick and easy profit by taking advantage of the inefficiencies in markets.

Arbitrage trades, which can be made in stocks, commodities, traditional currencies, and cryptocurrencies, are a popular choice amongst investors, but accessing these investment opportunities can be very challenging for retail investors in both traditional and cryptocurrency markets. 

Traditionally, for retail investors to get into arbitrage requires capital, technical knowledge, and bot infrastructure. New technology like White Whale, a project that aims to give retail investors the chance to benefit from crypto arbitrage in a straightforward and simple way, is trying to change this. In addition to offering the community a chance to support the UST peg—an algorithmic stablecoin on Terra which is pegged to the value of the US dollar—White Whale plans on changing the limited access to arbitrage. 

According to the company’s white paper, its mission is to give access to complex trading strategies including arbitrage through its platform that “decentralizes the enforcement of the UST peg”. Technically speaking, the platform aims to make the entire Terra ecosystem more secure, robust, and efficient by “opening up L1 seigniorage arbitrage to the Terra community and empowering them to earn delta-neutral profits while simultaneously contributing to keeping the peg”.

The company explains that within the Terra ecosystem arbitraging UST back to peg is uniquely appealing to loyal community members “because not only does it generate delta-neutral profit, it also serves the critical function of keeping the peg, making the Terra ecosystem more secure and robust”.

One of the main issues in the traditional arbitrage world is the problematic market maneuvers made by whales. Typically, whales’ goal is to make money from manipulating markets by buying out from small retail users and shorting projects. White Whale aims to combat these “unprincipled and price agnostic” attempts and level the playing field by empowering crypto users and creating a culture where everyone has an equal opportunity to build wealth. “In short, as of now, it’s strictly a whale’s game,” a spokesperson for the company noted.

With some altcoins reporting a 60% crash in 2021, and many major stablecoins temporarily losing their peg, seeing corrections of up to 10%. White Whale highlights that “UST, being the most established algorithmic stablecoin as well as having inherent value as a yield-bearing asset, is by far the best chance the crypto world has yet seen of having a truly decentralized stablecoin.”