Stablecoin depegs have created some of the most reliable arbitrage windows in DeFi history. In 2022, USDC, USDT, and DAI all briefly lost their $1 pegs, and traders who acted quickly captured meaningful spreads. More recently, stablecoin arbitrage opportunities have continued to emerge across DeFi in 2025 and 2026, driven by liquidity fragmentation across chains and funding-rate dynamics in yield-bearing stablecoin markets. 



For USDL on Liquid Loans, the mechanism is even more direct: when USDL trades below $1, the protocol&#x27;s built-in redemption system lets you capture the spread without needing a willing counterparty.



Here&#x27;s a step-by-step guide on how to profit from arbitraging USDL.



<h2 class="wp-block-heading tablecontent">How the USDL Peg Works (And Why It Creates Arbitrage)</h2>



USDL is the native stablecoin of the Liquid Loans protocol on PulseChain. It is designed to maintain a soft peg to $1 USD, backed by PLS collateral locked in vaults. When USDL trades below $1 on the open market, the protocol&#x27;s redemption mechanism creates a direct arbitrage path: you can buy USDL below $1 and redeem it at face value for PLS collateral, capturing the spread.



This two-way peg stabilization is a core design feature, not a bug. <a href="https://docs.solomonlabs.org/usdv/usdv-and-susdv/peg-arbitrage-mechanism" data-type="link" data-id="https://docs.solomonlabs.org/usdv/usdv-and-susdv/peg-arbitrage-mechanism">According to the Solomon peg arbitrage framework</a> for USD-pegged assets, arbitrageurs play a critical role in re-anchoring pegs after deviations by minting or redeeming when price diverges from $1. The same mechanic applies to USDL on Liquid Loans.



Why does USDL depeg below $1? The most common causes are:



<ul class="wp-block-list">
<li>Sudden sell pressure from vault liquidations or large holders exiting positions</li>



<li>Thin liquidity in USDL trading pools on PulseChain DEXs</li>



<li>Broader market stress events that drive stablecoin depegs across DeFi</li>
</ul>



Note: There are other tokens named USDL in the market, including Paxos&#x27; Lift Dollar (a regulated yield-bearing stablecoin on Arbitrum and other chains) and Lemma Finance&#x27;s USDL (backed by long spot and short futures positions). This guide covers only the Liquid Loans USDL on PulseChain and its redemption-based arbitrage mechanism.



<h2 class="wp-block-heading tablecontent">Step #1: Identify a Price Discrepancy</h2>



A price discrepancy for USDL would technically be any value under $1. 



However, there are a few things to consider:



<ol class="wp-block-list">
<li>Redemption Fee. If you want to redeem USDL you have to pay a fee. It is usually 0.5% but can range as high as 5%. Make sure that if you plan on using the redemption mechanism for arbitrage, you must have a cost basis below 99.5 cents to profit.</li>



<li><a href="https://www.thecoinzone.com/blockchain/storage-load-s-load/" data-wpil-monitor-id="180">Gas Fees.</a> Arbitraging USDL will require a minimum of three transactions. You must buy USDL, redeem USDL, and sell PLS back into the asset you originally held. Make sure that the expense of the gas fee does not significantly impact your margins.</li>



<li><a href="https://www.thecoinzone.com/defi/price-impact-vs-slippage" target="_blank" rel="noreferrer noopener">Price Impact</a>. Whenever you buy or sell an asset, you move the price against yourself. For example, if the <a href="https://www.thecoinzone.com/pulsechain/what-influences-the-price-and-supply-of-usdl/" data-wpil-monitor-id="1065">price of USDL</a> is 99.5 cents and you buy 1000 dollars worth, you might buy the first 500 dollars at 99.5 cents and the second 500 dollars at 99.6 cents. This will impact your profit margins if your order is substantial and/or the liquidity pool is thin. </li>
</ol>



<h3 class="wp-block-heading">Profit Threshold Calculator: Is This Trade Worth It?</h3>



Before you execute, run this quick formula to confirm the trade is profitable:



Minimum Profitable Entry Price = $1.00 minus Redemption Fee (%) minus Price Impact (%) minus Gas Cost ($) divided by Position Size ($)



Worked Example A: Small Position ($1,000) - USDL market price: $0.985 - Redemption fee: 0.5% = $5.00 - Estimated price impact: 0.1% = $1.00 - Gas fees (3 transactions): ~$2.00 - Total costs: $8.00 - Gross profit at $1.00 redemption value: $15.00 - Net profit: $15.00 minus $8.00 = $7.00 (0.7% net return) - Verdict: Marginally profitable. Gas fees eat a significant share at this position size.



Worked Example B: Large Position ($50,000) - USDL market price: $0.985 - Redemption fee: 0.5% = $250.00 - Estimated price impact: 0.3% = $150.00 (larger order moves price more) - Gas fees (3 transactions): ~$2.00 - Total costs: $402.00 - Gross profit: $750.00 - Net profit: $750.00 minus $402.00 = $348.00 (0.7% net return) - Verdict: Profitable. Gas fees are negligible at scale; price impact is the main variable to watch.



Key Rule: Your average USDL entry price must be below (1 minus redemption fee minus estimated price impact). At a 0.5% redemption fee and 0.2% average price impact, you need USDL below $0.993 to break even. Any price below $0.990 starts generating meaningful profit on positions above $10,000.



<h2 class="wp-block-heading tablecontent">Step #2: Choose a Liquidity Pool</h2>



Although arbitrage bots help with this nearly instantly, no liquidity pool has the same price for any asset.



For example, a centralized exchange may list USDL and keep its price fixed in their order books at $1. If you look on DexScreener, it might show that USDL has temporarily depegged to allow for an arbitrage opportunity. However, just because the prices on some decentralized exchanges have dipped, does not mean you will get that deal in other liquidity pools or centralized order books.



Where to Check USDL Prices:



<ul class="wp-block-list">
<li>DexScreener (PulseChain filter): Real-time pool prices and volume; best for spotting depegs quickly</li>



<li>Piteas.io (DEX Aggregator): Splits your order across multiple pools to minimize price impact; recommended for positions above $5,000</li>



<li>PulseX directly: Good for smaller positions where aggregator routing overhead is not worth it</li>
</ul>



Rule of thumb: if the USDL depeg is large (below $0.97) and has been sustained for more than a few minutes, it is likely visible across most pools. If the depeg is small (between $0.993 and $0.999), you may only find it in one or two thin pools, and price impact from your purchase may eliminate the spread entirely.



<h2 class="wp-block-heading tablecontent">Step #3: Buy USDL</h2>



Once you have found a price discrepancy, go to the decentralized exchanges or DEX aggregator and buy USDL.



<a rel="noreferrer noopener" href="https://www.thecoinzone.com/pulsechain/pulsex-complete-guide" target="_blank">PulseX</a> is used in this example, but go wherever you get the lowest price for USDL.



<figure class="wp-block-image size-full is-resized"><img width="325px" height="183px" srcSet="https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/09/12035930/Crypto-Arbitrage-USDL-for-PLS-375x300.webp 375w, https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/09/12035930/Crypto-Arbitrage-USDL-for-PLS-662x528.webp 662w, https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/09/12035930/Crypto-Arbitrage-USDL-for-PLS-768x613.webp 768w, https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/09/12035930/Crypto-Arbitrage-USDL-for-PLS.webp 688w" sizes="(max-width: 425px) 150px, 450px" src="https://ll-blog-dev.s3.ap-southeast-2.amazonaws.com/wp-content/uploads/2023/09/12035930/Crypto-Arbitrage-USDL-for-PLS.webp" alt="Arbitrage PLS for Profit" class="wp-image-3930" style="width:362px;height:289px"/></figure>



Click “Swap”. 



Then Click “Confirm Swap”.



Then Click “Confirm” inside of your wallet.



<h2 class="wp-block-heading tablecontent">Step #4: Redeem USDL for PLS</h2>



Follow this super easy guide <a href="https://www.thecoinzone.com/liquidloans/how-to-redeem-usdl-for-pls" target="_blank" rel="noreferrer noopener">to redeem USDL for PLS</a>.



Before redeeming, confirm the current redemption fee on the <a href="https://go.liquidloans.io/#/redemptions" data-type="link" data-id="https://go.liquidloans.io/#/redemptions">Redemption Page</a>. At 5%, you need an average USDL entry price below $0.95 to profit. At 0.5%, you need an entry price below $0.993 (after price impact). If the fee has spiked since you bought USDL, consider whether holding and waiting for the fee to reset is more profitable than redeeming immediately.



<h2 class="wp-block-heading tablecontent">Step #5: Sell PLS for Your Original Asset</h2>



Since I was holding PLS before this transaction, I am left with PLS after redemption and do not need an additional transactions.



However, if you sold CST or a bridged stablecoin to buy cheap USDL, you can sell back into that asset using PulseX or another DEX.



<h2 class="wp-block-heading tablecontent">Risk and Cost Framework: What Can Go Wrong</h2>



Even when USDL is trading below $1, several factors can turn a profitable-looking trade into a loss. Review each risk before executing.






👉 Quick takeaway: Redemption fee spikes and gas costs are the two risks most likely to eliminate profit on small positions. Always check the current redemption fee and estimate total gas before entering a position.

<div style="overflow-x:auto;margin:0 0 24px 0">
 <table style="width:100%;border-collapse:collapse;font-size:16px;line-height:1.5;min-width:850px;border:1px solid #e5e7eb"><thead><tr style="background-color:#f8fafc;text-align:left"><th style="padding:14px 16px;border-bottom:1px solid #e5e7eb">Risk</th><th style="padding:14px 16px;border-bottom:1px solid #e5e7eb">What It Means</th><th style="padding:14px 16px;border-bottom:1px solid #e5e7eb">How to Mitigate</th></tr></thead><tbody><tr><td style="padding:14px 16px;border-bottom:1px solid #e5e7eb">Redemption Fee Spike</td><td style="padding:14px 16px;border-bottom:1px solid #e5e7eb">
 🔴 Fee can jump from 0.5% to 5% 
 If many redemptions occur in a short window
 </td><td style="padding:14px 16px;border-bottom:1px solid #e5e7eb">Check the current fee on the Redemption Page before buying USDL</td></tr><tr style="background-color:#fcfcfd"><td style="padding:14px 16px;border-bottom:1px solid #e5e7eb">Price Impact</td><td style="padding:14px 16px;border-bottom:1px solid #e5e7eb">
 ⚠️ Large USDL buy in a thin pool moves the price against you
 </td><td style="padding:14px 16px;border-bottom:1px solid #e5e7eb">Use a DEX aggregator like Piteas.io to split across pools; check pool depth first</td></tr><tr><td style="padding:14px 16px;border-bottom:1px solid #e5e7eb">Slippage</td><td style="padding:14px 16px;border-bottom:1px solid #e5e7eb">
 ⚠️ PLS price may move between redemption and sale
 </td><td style="padding:14px 16px;border-bottom:1px solid #e5e7eb">Set a tight slippage tolerance; execute the PLS sale immediately after redemption</td></tr><tr style="background-color:#fcfcfd"><td style="padding:14px 16px;border-bottom:1px solid #e5e7eb">Gas Fee Variance</td><td style="padding:14px 16px;border-bottom:1px solid #e5e7eb">
 🔴 Three transactions required 
 Gas spikes during network congestion can eliminate profit at small position sizes
 </td><td style="padding:14px 16px;border-bottom:1px solid #e5e7eb">Estimate gas before buying USDL; at small position sizes, gas can eliminate profit entirely</td></tr><tr><td style="padding:14px 16px;border-bottom:1px solid #e5e7eb">Liquidity Risk</td><td style="padding:14px 16px;border-bottom:1px solid #e5e7eb">
 ⚠️ Redemption queue may have delays during high-volume depeg events
 </td><td style="padding:14px 16px;border-bottom:1px solid #e5e7eb">Size positions to avoid queue delays; monitor redemption page activity</td></tr><tr style="background-color:#fcfcfd"><td style="padding:14px 16px">Regulatory Context</td><td style="padding:14px 16px">
 ⚠️ Yield-bearing stablecoin regulation evolving 
 GENIUS Act, HKMA guidance active in 2025-2026
 </td><td style="padding:14px 16px">Stay informed on stablecoin law changes that may affect redemption mechanics</td></tr></tbody></table>
</div>




Bottom line: at a 0.5% redemption fee, you need USDL below $0.993 (after accounting for price impact) to break even. Any position where your all-in cost per USDL is above that threshold will result in a loss.

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How to Arbitrage USDL for Profit: Step-by-Step Guide with Profit Calculations

When USDL trades below $1, Liquid Loans' redemption mechanism lets you capture the spread. Learn the exact steps, profit thresholds, and risks before you execute.