The De-fi sphere had quite the shake up thanks to the UST exploit at the start of last week. Crypto in general got slapped around pretty hard between that and the general market conditions, with BTC dragging the market around since the beginning of the month (and the last few months, really).
In bear markets, big drops can usually over extend themselves and bounce and that's what has happened here. Expecting a bounce, I sought out opportunities around that. I was fortunate enough to have been learning about TOMB Finance's De-Fi system.
If you're not familiar with it, TOMB pegs to FTM via seigniorage; which simply means that TOMB will not be minted if the pair is below the 1:1 peg, and TOMB will be minted if it is above peg in an attempt to dilute the supply slowly, thus forcing a return to peg. Please keep in mind the above graph is essentially how many TOMB you could swap per FTM token, so it is not above peg in this case.
At its peak, the pair shortly hovered around 4.5 TOMB per unit of FTM. The light blue line represents my buy-in and then dark blue line at the bottom of the chart represents the goal peg for the pair.
Now, why would I chase this? 15-25% profits were available basically on any crypto over the last couple days, so it was hard to go wrong, but I felt like there would be a way to multiply my exposure without using leverage. This is where TOMB comes in.
Assuming TOMB will eventually return to peg (I assumed it would take about a month but early progress has been quite stellar), investing in TOMB would allow me to capture both gains from repegging as well as gains in the greater market (particularly in FTM). Take a look at this theoretical chart with three instances:
In each instance, imagine the price of FTM stays at $0.30 and that each of these scenarios respect that. Essentially, in our third scenario, you see this imbalance and decide to yolo your FTM LP into TOMB. By the time peg is regained, again assuming that FTM stays at $0.30, You'll increase your FTM bag by 50%, regardless of the price of FTM.
What if FTM does not stay at $0.30, though? Simple: TOMB would be there as well (or close enough to it) if it has returned to peg. Essentially, you are playing a unique form of arbitrage, where TOMB acts as the same currency as FTM, but operates somewhat independently. You were merely taking advantage of this independence and assuming we would return to it.
As of this moment, TOMB is 1.58:1 with FTM, so there is still time to abuse the de-peg, but since the start writing this article that ratio has dropped from 1.7:1. I would love to elaborate more before posting (I used Beefy Finance's TOMB-BASED pool to auto-compound my position thinking the time frame on this play would be longer), but I want to publish this now so people can decide if they want to use this method to try make some money off the re-pegging. Given another half hour for writing, I'd have liked to have gone over the recognition of the top, but that may be for another day.
Even though the play is mostly over, I hope this article helps you when a similar opportunity presents itself. Personally, I ended up getting in late myself - I had my swap set up at 4.5:1, but the tx fell through as I went for dinner and after that I had forgotten about it until later that evening. Still, I am rather proud of this trade.
TLDR; By buying the stable, you could essentially purchase 1 FTM for as low as $0.07 a couple days ago as FTM hovered near $0.22 at its lowest. Making that trade allows you to both take advantage of TOMB's return to peg as well as the bump in price action on FTM.
Hope this helped!
Charting courtesy TradingView.
