DeFi Magic’s Arbitrage Explain
DeFi Magic is a complex ecosystem that is built both on internal products and applications, as well as external cooperation with partners.
In this Medium article, the DeFi Magic’s arbitrage system is explained in how it is designed to achieve 2 goals:
1. To help you make money
2. To help the DeFi Magic ecosystem and their partners’ ecosystems to make money
One of the ways to achieve these goals is by utilizing 5 different arbitrage trading strategies. Though this arbitrage is developed and operating on both Polygon and BSC, the token examples below will relate to the BSC side.
What Is Arbitrage Trading?
In simple terms, it is a process of buying a coin or token from one exchange and then selling it on another exchange where the price is higher.
In our case, we are going to replace exchange with liquidity pool (LP).
1. Price Correction:
Assume you have 2 LP pairings:
If someone comes in and buy $3000 worth of MAGIC tokens from the MAGIC/BNB LP pairing, the price of MAGIC token in this LP pairing will go up.
When you buy something, the price goes up. When you sell something, the price goes down.
This means that the price of MAGIC tokens on the MAGIC/BNB LP pairing is now higher than the price of MAGIC tokens on the MAGIC/TETHER pairing. This price difference is called price disparity.
So, what happens if you are in this situation?
Will you try to take advantage and buy MAGIC tokens from the MAGIC/TETHER LP pairing and then sell them for a higher price on the MAGIC/BNB LP pairing?
If you do this, you have done a price correction arbitrage trade to correct the price disparity between the 2 LP pairings. Even if you don’t want to do it, someone else will do it because this is a profitable trading opportunity.
2. Basic Arbitrage
Assume you have the same 2 LP pairings:
IF nobody buys or sells MAGIC tokens, arbitrage can still occur.
Why and How?
The price of BNB always moves and the price of TETHER is constant because it is pegged to the US Dollar.
If the price of BNB goes up by 10%, the dollar value in the MAGIC/BNB LP pairing is now higher than the price in the MAGIC/TETHER LP pairing.
This gives you the opportunity to do the following:
a. Use TETHER to buy MAGIC tokens from MAGIC/TETHER LP pairing
b. Sell MAGIC tokens for BNB on MAGIC/BNB LP pairing.
By doing this, you can help to fix the price disparity between BNB and TETHER while making yourself some good profits.
3. Partner Arbitrage
DeFi Magic has an LP pairing with PI Protocol.
Assume you have the following LP pairings:
If there is a price disparity between any of these LP pairings, there is a profitable scenario that you can take advantage of to make an arbitrage trade.
When you fix the price disparity for any 2 LP pairings, the rest of the LP pairings will also be automatically affected. This creates a domino effect and you will have many other arbitrage trading opportunities.
As DeFi Magic continues to create new partnerships with other projects, the amount of LP pairings will increase and that means even more arbitrage trading opportunities for you.
Assume you have 2 LP pairings:
axBNB is a synthetic token that has 1:1 value to BNB.
If there is a price disparity between these 2 LP pairings, there is an arbitrage trading opportunity that you can take advantage of.
5. Off Dex Swaps
Assume you have 4 LP pairings:
If there is a price disparity between any of these LP pairings, there are arbitrage trading opportunities that you can take advantage of.
The true beauty behind providing so many arbitrages trading opportunities that you can take advantage of is…
You will need to buy and sell MAGIC tokens to make arbitrage trades.
Every buy and sell transaction in DeFi Magic comes with a transaction fee of 1.5%
Transaction fee: 1.5%
1% goes to staking rewards
0.2% goes to the treasury fund
0.3% will be burned and removed from supply forever
For Partner Arbitrage trading opportunities, both DeFi Magic and PI Protocol ecosystems will benefit from their respective transactions fees in every buy and sell transaction.
Join DeFi Magic social media to learn more:
$DeFi MAGIC 💫
DexGuru Magic: https://dex.guru/token/0x7538588f72ddada8583409a4a72915d550371b8f-bsc
DexGuru Dark Magic: https://dex.guru/token/0x61daecab65ee2a1d5b6032df030f3faa3d116aa7-polygon