A quick look at 5 arbitrage opportunities under "Coin Stock Fusion"

This article comes from: Tiao.sol

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

Editor's note:

On March 6, there were rumors that Coinbase was interested in restarting its plans to tokenize stock COIN and other securities. Coinbase made its first attempt in 2020, but gave up due to regulatory hurdles, and with the SEC's new cryptocurrency task force, Coinbase seems to see an opportunity to restart the plan.

Just two days later, RWA project Backed announced on March 8 that it had launched the Coinbase stock derivative token wbCOIN on the Base Network, the value of the token is supported by COIN stock 1:1. Although Backed said it was clear that the move had nothing to do with Coinbase, it was hard not to make people think about it at such a fast pace.

Over the weekend, cryptocurrency analyst Tiao.sol posted on X, analyzing multiple arbitrage opportunities that may exist between the two markets under the "coin-share parallel" model, which may help you find some new operational inspiration at the moment when the market is in a confusing future.

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

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

Below, I list several potential arbitrage opportunities and strategies, and you are welcome to discuss additionally.

Opportunity 1: Price arbitrage scenario

Traditional U.S. stock markets may fluctuate violently due to news, macroeconomic data or corporate events (such as financial report releases), while on-chain tokenized stocks (such as wbCOIN) may not immediately reflect these changes due to insufficient liquidity or delayed price data.

Strategy

Monitor the spread between traditional markets (such as Coinbase stock COIN) and their tokenized assets (such as wbCOIN). If COIN falls sharply (or rises) in the traditional market and wbCOIN reacts lagging in the cryptocurrency market, traders can buy (or sell) COIN at a lower (or higher) price in the traditional market while selling (or buy) wbCOIN at a higher (or lower) price in the cryptocurrency market.

risk

Delay in price data, high transaction fees, congestion in blockchain networks, and legal risks between tokens and actual stock values ​​(such as tokens fail to effectively anchor stocks).

Example

If COIN falls 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 $5 profit (after deducting fees and slippage).

Opportunity 2: Liquid price-to-price arbitrage scenario

Tokenized stock liquidity in cryptocurrency markets is usually lower than that in traditional U.S. stock markets, especially when trading volumes are low, the bid-ask spreads tend to be larger.

Strategy

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

risk

Lower liquidity may limit transaction volume and make it difficult to exit quickly; gas fees on the chain may also erode profits.

Example

If wbCOIN is buying $205 and selling $210 on AerodromeFi or CoWSwap platforms, traders can earn a $5 spread by placing a buy and sell order.

Opportunity 3: 24*7 Time Arbitrage (Time Zone Arbitrage) Scenario

The traditional U.S. stock market is only open from 9:30 a.m. to 4:00 p.m. EST on weekdays, while tokenized stocks on the chain are traded 24*7 all-week. This provides an opportunity to take advantage of global market volatility during the U.S. market closing.

Strategy

After the U.S. market is closed, global markets (such as Asia or Europe) may affect Coinbase or other U.S. stock prices due to news or events, and wbCOIN may not have been fully adjusted in the cryptocurrency market. Traders can buy (or sell) wbCOIN at a lower (or higher) price in the cryptocurrency market, waiting for the price to be fixed when the U.S. market reopens.

risk

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

Example

Events in Asia boosted Coinbase’s outlook after the U.S. market closed on Friday, but wbCOIN has not yet risen. Traders can buy wbCOIN at a low price in the cryptocurrency market and sell after the U.S. market reopens on Monday.

Opportunity 4: Cross-market arbitrage scenario

Tokenized stocks tend to trade on multiple chains (such as Base, Ethereum, Polygon), multiple traditional exchanges (such as NYSE, Nasdaq) and multiple DeFi protocols (such as Uniswap), and there may be price spreads between different platforms.

Strategy

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

risk

Cross-chain transaction delays, higher gas fees, regulatory differences between platforms.

Example

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

Opportunity 5: Event-driven arbitrage scenario

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

Strategy

Forecast events that may affect Coinbase or other U.S. stocks (such as SEC policy changes, mergers, acquisitions, etc.), predict price changes, and trade after the event using the price difference between traditional stocks and tokenized stocks.

risk

The results of the event are highly uncertain; prices may further deviate from expectations.

Example

If Coinbase releases positive financial reports, COIN will rise 10% in the traditional market, while wbCOIN will rise only 5% due to low liquidity, traders can buy wbCOIN at a low price in the cryptocurrency market, waiting for the price to be repaired.

Key Elements

• Adequate liquidity: The current liquidity of tokenized stocks is still low, limiting the scale of arbitrage to a certain extent.
• Fees and slippage: On-chain gas fees, traditional market commissions, and handling fees and costs in token transactions, etc. may all erode profits.

Summary and suggestions

With the launch of wbCOIN, tokenized versions of other US stocks (especially stocks with strong liquidity and high popularity like Apple, Amazon, and Tesla) are expected to be gradually launched.

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

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