Arbitrage Opportunities with Synthetic Assets
Close the gap between an external listing and NAV
A matched L+S pair always redeems for its net asset value at the protocol. Any venue quoting the pair away from NAV is handing you the difference, if you can get there first.
Step by step
Know what's pegged and what isn't
Redemption always pays oracle value for a matched L+S pair. The protocol's own pools quote at NAV plus a small spread. An external listing is free to drift, and that drift is the whole opportunity.
The peg is enforced by anyone willing to mint or redeem, which means you. Nothing else holds it.
Watch for divergence
Track external L/S prices against NAV. Trading below NAV means you can buy the pair cheap and redeem it for more. Trading above means you can mint at NAV and sell the rich leg.
Gaps close in seconds once anyone notices. Without monitoring you are reading history.
Buy the discount
Pick up cheap L and S on the external venue, then burn the matched pair at Continuum for full stablecoin value. The difference is yours.
The protocol's pools sit at NAV plus a small spread, so entry pricing is predictable. Mint and redeem is what lets you drag an external listing back.
Sell the premium
Mint L/S at NAV, sell the expensive leg on the venue carrying the premium, then either hold the other leg or redeem against a pair you buy back cheaper.
The protocol's pools fill at NAV plus spread. The premium only exists somewhere else, so that's where the sell leg goes.
Automate it
Competitive arb here is a bot problem. On Solana, Jito bundles let the mint, swap and redeem steps land together or not at all.
Without a bundle, a faster bot inserts itself between your legs and takes the spread you found. Whether a well-run bot still clears a profit after fees once several of them are competing on the same market is an open question, and it depends on the day.
What can go wrong
- Prices move mid-transaction and a profitable quote can settle at a loss.
- On small gaps the fees eat the whole thing.
- Other bots are watching the same spread with better latency.
- A multi-step arb touches several programs in one transaction, and any of them can fail.