<figure class="wp-block-image size-large"><img width="325px" height="183px" srcSet="https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/09/11235524/arbitrage-USDL-for-profit-375x211.webp 375w, https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/09/11235524/arbitrage-USDL-for-profit-662x372.webp 662w, https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/09/11235524/arbitrage-USDL-for-profit-768x432.webp 768w, https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/09/11235524/arbitrage-USDL-for-profit.webp 688w" sizes="(max-width: 425px) 150px, 450px" src="https://ll-blog-dev.s3.ap-southeast-2.amazonaws.com/wp-content/uploads/2023/09/11235524/arbitrage-USDL-for-profit.webp" alt="arbitrage USDL for profit" class="wp-image-3926"/></figure>



In 2022, when major stablecoins like USDC, <a href="https://www.thecoinzone.com/stablecoins/what-is-usdt" data-type="URL" data-id="https://www.thecoinzone.com/stablecoins/what-is-usdt" target="_blank" rel="noreferrer noopener">USDT</a>, and <a href="https://www.thecoinzone.com/stablecoins/dai-of-maker-dao-risks" data-type="URL" data-id="https://www.thecoinzone.com/stablecoins/dai-of-maker-dao-risks" target="_blank" rel="noreferrer noopener">DAI</a> lost their pegs, numerous prominent investors seized the opportunity to increase their holdings by investing millions during the price drop.



Some simply bought and held, patiently waiting for prices to rise, while others engaged in <a href="https://www.thecoinzone.com/defi/crypto-arbitrage" data-type="URL" data-id="https://www.thecoinzone.com/defi/crypto-arbitrage" target="_blank" rel="noreferrer noopener">arbitrage</a>, buying in one location and selling in another.



For USDT, arbitrage required over 100,000 USDT and accreditation as an investor, creating a significant entry barrier. However, the Liquid Loans protocol has democratized this process, enabling anyone with a small amount of <a rel="noreferrer noopener" href="https://www.thecoinzone.com/liquidloans/usdl-crypto" data-type="URL" data-id="https://www.thecoinzone.com/liquidloans/usdl-crypto" target="_blank">USDL</a> to participate in <a href="https://www.thecoinzone.com/defi/crypto-redemptions" target="_blank" rel="noreferrer noopener">redemptions</a>.



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



<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>
<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>



<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 <a rel="noreferrer noopener" href="https://dexscreener.com/pulsechain" target="_blank">DexScreener</a>, 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 <a rel="noreferrer noopener" href="https://www.thecoinzone.com/defi/liquidity-pools" target="_blank">liquidity pools</a> or centralized order books.



Thus, it is important to make sure you choose a liquidity pool that gets you the lowest price for USDL.



You can do this manually, but using a <a href="https://www.thecoinzone.com/defi/dex-aggregators" target="_blank" rel="noreferrer noopener">DEX Aggregator</a> such as <a rel="noreferrer noopener" href="https://app.piteas.io/" target="_blank">Piteas.io</a> can help you get the best deal.



<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 loading="lazy" 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"/></figure>



Note: Due to Price Impact during the trade, my original value of $68,200 will yield me $68,000. That’s roughly $200 and a 0.29% loss. Now, since the redemption fee is still 0.5%, I will need a price below 99.2 cents in order to profit from arbitrage.



Click “Swap”. 



Then Click “Confirm Swap”.



<figure class="wp-block-image size-full is-resized"><img loading="lazy" width="325px" height="183px" srcSet="https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/09/12040104/USDL-Arbitrage-Confirm-232x300.webp 232w, https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/09/12040104/USDL-Arbitrage-Confirm-662x855.webp 662w, https://d2ly46a6b1u3g6.cloudfront.net/wp-content/uploads/2023/09/12040104/USDL-Arbitrage-Confirm.webp 688w" sizes="(max-width: 425px) 150px, 450px" src="https://ll-blog-dev.s3.ap-southeast-2.amazonaws.com/wp-content/uploads/2023/09/12040104/USDL-Arbitrage-Confirm.webp" alt="USDL Arbitrage" class="wp-image-3931"/></figure>



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>.



Remember to take note of the redemption fee. Although it is usually 0.5%, it can be as high as 5%. If it is 5%, you will need an average cost of USDL under 95 cents in order to profit. 



Click this link to get the the <a href="https://go.liquidloans.io/#/redemptions">Redemption Page</a>



<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">Considerations</h2>



Remember: Just because USDL is under 1 USD does not mean you can turn a profit on it.



You must consider prince impact and slippage. That is, how much your order moves the price against yourself and how much the prices of the assets you hold move during your order.



You must also consider the redemption fees when calculating the margins of your arbitrage.



With that said, look out for USDL under $1 USD; it could be the easiest money of your life!

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