This article is from: Tiao.sol

Compiled by｜Odaily Planet Daily (@OdailyChina); Translator｜Azuma (@azuma_eth）

Editor's Note:

On March 6, rumors circulated that Coinbase intended to restart its plans for tokenizing its stock COIN and other securities. In 2020, Coinbase made an initial attempt at this but abandoned it due to regulatory hurdles. With the SEC having newly established a cryptocurrency working group, Coinbase seems to see an opportunity to revive this plan.

Just two days later, the RWA project Backed announced on March 8 that it had launched the Coinbase stock derivative token wbCOIN on the Base network, with the token's value backed 1:1 by COIN stock. Although Backed clarified that this move was unrelated to Coinbase, the rapid pace of action is hard not to speculate about.

Over the weekend, cryptocurrency analyst Tiao.sol posted on X, analyzing multiple arbitrage opportunities that may exist between the two markets under the "coin-stock parallel" model, which could help you find new operational inspiration in the current uncertain market direction.

The following is the original content, compiled by Odaily Planet Daily.

With Backed launching the tokenized version of Coinbase stock (wbCOIN) on the Base blockchain, SEC regulation seems to have fully opened the door. This could signify a transformative shift in the financial markets, indicating that other US stocks may soon begin tokenization. For traders, this not only brings new market opportunities but also introduces unique trading strategies.

Below, I have listed several potential arbitrage opportunities and strategies, and everyone is welcome to contribute to the discussion.

Opportunity 1: Price Arbitrage

Scenario

The traditional US stock market may experience significant volatility due to news, macroeconomic data, or company events (such as earnings releases), while on-chain tokenized stocks (like wbCOIN) may not immediately reflect these changes due to insufficient liquidity or delayed price data.

Strategy

Monitor the price difference between the traditional market (such as Coinbase stock COIN) and its tokenized asset (like wbCOIN). If COIN drops significantly (or rises) in the traditional market while wbCOIN reacts slowly in the cryptocurrency market, traders can buy (or sell) COIN at a lower (or higher) price in the traditional market while selling (or buying) wbCOIN at a higher (or lower) price in the cryptocurrency market.

Risks

Price data delays, high transaction fees, blockchain network congestion, and legal risks regarding the token's ability to effectively anchor to the stock's value (such as the token failing to effectively represent the stock).

Example

If COIN drops to $200 in the traditional market, but due to liquidity issues wbCOIN remains at $205, traders can buy COIN in the traditional market and sell wbCOIN in the cryptocurrency market, locking in a $5 profit (after fees and slippage).

Opportunity 2: Liquidity Spread Arbitrage

Scenario

The liquidity of tokenized stocks in the cryptocurrency market is often lower than that of traditional US stock markets, especially during low trading volumes, where the bid-ask spread tends to be larger.

Strategy

Buy stocks (like COIN) in the traditional market at prices close to market value, convert them to tokens (like wbCOIN) through blockchain mechanisms (such as Base or other DeFi platforms), and then sell them at a premium in the cryptocurrency market. Alternatively, provide liquidity in low liquidity markets (acting as a market maker) and profit from the bid-ask spread.

Risks

Lower liquidity may limit trading volume, making it difficult to exit quickly; on-chain gas fees may also erode profits.

Example

If the buy price for wbCOIN on AerodromeFi or CoWSwap is $205 and the sell price is $210, traders can provide liquidity by placing buy and sell orders, earning a $5 spread.

Opportunity 3: 24/7 Time Arbitrage (Time Zone Arbitrage)

Scenario

The traditional US stock market is only open from 9:30 AM to 4:00 PM Eastern Time on business days, while on-chain tokenized stocks trade 24/7. This provides opportunities to exploit global market fluctuations during the US market's closed hours.

Strategy

After the US market closes, global markets (such as Asia or Europe) may impact the price of Coinbase or other US stocks due to news or events, while wbCOIN in the cryptocurrency market may not have fully adjusted. Traders can buy (or sell) wbCOIN at a lower (or higher) price in the cryptocurrency market, waiting for price correction when the US market reopens.

Risks

Severe price fluctuations may lead to losses; token prices may deviate from true value due to low participation.

Example

After the US market closed on Friday, an event in Asia boosts Coinbase's outlook, but wbCOIN has not yet risen. Traders can buy wbCOIN at a low price in the cryptocurrency market and sell it when the US market reopens on Monday.

Opportunity 4: Cross-Market Arbitrage

Scenario

Tokenized stocks often trade on multiple chains (such as Base, Ethereum, Polygon), multiple traditional exchanges (such as NYSE, Nasdaq), and multiple DeFi protocols (such as Uniswap), where price discrepancies may exist between different platforms.

Strategy

Monitor the prices of wbCOIN or other tokenized stocks across various platforms. If the price on Base is lower than on Ethereum or the traditional market, traders can use cross-chain bridges or traditional market entry and exit channels to buy low on one platform and sell high on another.

Risks

Cross-chain trading delays, high gas fees, and regulatory differences between platforms.

Example

If wbCOIN is priced at $200 on Base but $205 on Ethereum, traders can buy on Base and sell on Ethereum, earning the price difference (after deducting cross-chain fees).

Opportunity 5: Event-Driven Arbitrage

Scenario

Major events (such as Coinbase earnings reports, regulatory news, or hacking incidents) may lead to asynchronous price movements between traditional stocks and their tokenized versions.

Strategy

Predict events that may impact Coinbase or other US stocks (such as SEC policy changes, mergers, acquisitions, etc.), forecast price movements, and trade based on the price differences between traditional stocks and tokenized stocks after the event.

Risks

The outcomes of events are highly uncertain; prices may deviate further from expectations.

Example

If Coinbase releases a positive earnings report, COIN rises 10% in the traditional market, while wbCOIN only rises 5% due to low liquidity, traders can buy wbCOIN at a low price in the cryptocurrency market, waiting for price correction.

Key Elements

• Sufficient liquidity: Current liquidity for tokenized stocks remains low, somewhat limiting the scale of arbitrage.

• Fees and slippage: On-chain gas fees, traditional market commissions, and transaction costs in token trading can all erode profits.

Summary and Recommendations

With the launch of wbCOIN, other tokenized versions of US stocks (especially highly liquid and well-known stocks like Apple, Amazon, and Tesla) are expected to gradually go on-chain.

In summary, the price, liquidity, and time differences between tokenized stocks and traditional stocks, as well as cross-market and event-driven fluctuations, provide traders with various potential arbitrage opportunities.

In terms of tools, I recommend using real-time market data tools (such as TradingView, CoinGecko) and blockchain analysis platforms (such as Dune Analytics) to track prices and liquidity. At the same time, set strict stop-loss and take-profit levels, monitor gas fees and slippage, ensuring that profits can cover costs.

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