Arbitrage/Hedging on Exchange Rate Differences, with a Profit Margin of Around 6%!

Yesterday afternoon, I was still complaining that Berachain was not optimistic, and the exchange rate of Infrared's iBGT has been continuously dropping.

Last night, Infrared's official Twitter posted a lengthy article, stating that the protocol is secure while revealing that the unstake for iBERA is about to launch.

Although the update on iBERA cannot solve the exchange rate difference issue of iBGT, there are still opportunities.

➤ Logical Analysis:

1) iBERA is the liquidity staking token for BERA;

2) The theoretical relative value of iBERA to BERA gradually increases over time, with a current annual value growth of 4.36%;

3) Currently, through Infrared's official staking channel, 1 BERA can only yield 0.9825 iBERA;

4) However, since the official redemption (unstake) channel for iBERA has not been opened, the relative value of iBERA to BERA has been determined by the market;

5) About two months ago, after Berachain modified its emissions, the mining rewards for iBERA plummeted, and the demand for iBERA was weakened, with its ratio to BERA remaining above 1;

6) Currently, based on market prices, 1 BERA can obtain 1.0422 iBERA;

7) Therefore, it is clear that there is a price difference of 6% in obtaining iBERA through both the official staking and market liquidity channels.

8) Obviously, there is an opportunity for arbitrage here, and the key lies in the timing of the official redemption opening by Infrared.

Based on the current common liquidity token redemption mechanism, it is likely to require a fee of around 0.1% and a certain waiting time, allowing for the redemption of iBERA at the proportion of officially staked BERA, which means the market price of iBERA can rise to the official staking price.

Here, the only uncertainty is the timing of the official redemption opening.

If redemption opens in a week, then the APR would be around 312%.

If redemption opens in a month, then the APR here would be approximately 72%.

Thus, using lending or contract hedging for BERA is likely to be a stable happiness! (Currently, the APR for lending is around 20%, and the actual APR after a month of redemption opening would be 52%, faster would yield higher returns)

Note: The above is for information sharing only and not investment advice; please do your own research!

DeFi Enthusiast: BitHappy