Presenting the third strategy of our Kujira Investor series.
In today’s episode, I will introduce a strategy that guides investors through minting USK (Kujira’s decentralized stablecoin), lending axlUSDC on GHOST, and how to arbitrage the peg to generate positive returns.
Let’s get started.
Minting USK
1) Go to https://blue.kujira.app/
2) Navigate to the “Mint” tab:
3) Click “Open Position” in the blue box.
4) Enter the amount of ATOM you wish to lock up. You can borrow up to 60% of the value of your deposited collateral, so ensure you choose an LTV that will be more resistant to market downturns.
5) Enter the amount of USK you wish to mint.
Upon entering this number, you will see some stats that show what your open position will look like once created.
The most important numbers to look at are the LTV and the liquidation price. Watch the GIF below to see how this works:
6) Click “Open Position” and approve the transaction in Keplr.
At this point, the investor would have successfully minted USK. Now, how can they use this leveraged capital to further increase their returns.Arbitraging The Peg
Before we start, let’s first understand what arbitrage is.
Arbitrage is a trading strategy that takes advantage of a price difference between two or more markets.
In the context of stablecoins, this is when the price of a stablecoin deviates from its intended peg to the US dollar. Hence, a stablecoin trading at $0.98 that is supposed to be trading at $1 would present an arbitrage opportunity for investors.
Example — $USK Arbitrage
If $USK is above the peg (worth more than $1), minting $USK and selling into axlUSDC would generate positive returns for the investor, in the form of stablecoins.
In this example, the arbitrageur sells $USK at $1.02 to $axlUSDC and generates a profit of $0.02 per stablecoin.
So, how does an investor execute this arbitrage opportunity?
Arbitraging On FIN
After the investor mints $USK, they can open a position on FIN to set a limit sell for axlUSDC, as shown in the diagram below.
Once this limit order is filled, the investor will receive 10093 axlUSDC, netting them an extra 93 USDC over their initial investment (10000 $USK). Evidently, arbitrage represents a valuable, and relatively easy opportunity.
⚠️An investor should check the orderbook depth before executing this strategy, to ensure they are selling $USK when it is over the peg.
After generating a positive return through arbitrage, the investor should next look to begin lending axlUSDC on GHOST.
Lending On GHOST
The APRs for lending on GHOST fluctuate, but current rates can always be found on the homepage.
APRs on GHOST are entirely sustainable and regularly exceed 10%, which is even more impressive when you consider there are no inflationary incentives.
So, how can an investor begin lending on GHOST?
1) Select how much you wish to lend, pressing the blue “Lend” button to approve the transaction.
Once an investor lends this axlUSDC, it will appear in their wallet as xaxlUSDC.
You can track the APR earned for lent axlUSDC on FIN by tracking the chart shown below.
To track the APR earned for lending axlUSDC on FIN, use the tracking chart, which can be seen below.
Strategy Summary
Through minting USK on Kujira, this strategy offers investors the opportunity to generate positive returns without having to sell the underlying assets, but that’s not all.
Using this minted USK, investors have a multitude of options and can lend axlUSDC on GHOST to generate further returns without putting the asset at risk.
So, to investors seeking instant profit with little/no risk, or looking to passive income for lending their assets, this strategy may well be for you.
Over the coming weeks, Kujira Academy will be releasing a whole host of strategies that will educate investors on how to use this minted USK to generate positive returns.
So, to those following the Kujira Investor series, keep an eye out for new strategies, posted weekly to Kujira Academy on WinkHUB.
Useful Links
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Kujira Academy is a platform that aims to bridge the gap between young entrepreneurs and Web3, providing them with tangible education and career acceleration opportunities. Built by students, for students. Learn more about the academy and our vision here.
To register your interest and become a student of Kujira Academy, click here.
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