Regarding my experience eating a 1000% annualized return on USD1 yesterday～
After Binance released the USD1 incentive announcement yesterday, the market experienced a brief chaos, and the interest rates on various lending platforms soared, creating a huge arbitrage opportunity on the Bybit contract side.
Seeing the opportunity, I immediately executed the following strategy, which exceeded expectations: the price difference, which was initially expected to converge in five days, turned positive within hours due to the upward spike in the contract, directly accelerating the profit process. Due to the very short time of capital occupancy, the annualized return rate exceeded 1000%!
➤ Core logic:
Due to the rapid widening of the basis on the USD1 contract on Bybit after the announcement, shorts had to pay a very high funding rate to longs at one point, with the annualized rate reaching as high as 106.87%.
At that time, I thought of borrowing USD1 on-chain to sell spot while going long on the contract to obtain the funding rate paid by shorts, expecting to achieve a comprehensive annualized return close to 80% after deducting the borrowing interest. The profit composition: funding rate income + basis return - borrowing interest = net profit.
However, the instantaneous and drastic return of the basis saved us several days of waiting costs, resulting in an actual annualized return rate exceeding 1000%.
➤ Practical tutorial:
0/ Borrow USD1 on Lista, using PT lending to offset part of the interest with implied interest rates; if unsure how to do it, you can refer to previous article tutorials;
1/ Sell the borrowed USD1 for USDT;
2/ Open a long position on USD1 in the Bybit contract market;
3/ Wait for the basis to converge and close the position, keeping an eye on the funding rate;
Note: Although this is low-risk arbitrage, one must guard against the risk of insufficient margin due to the basis continuing to widen abnormally. I was lucky to encounter a "reverse spike" that accelerated the convergence; if the market moves in the opposite direction, it may require additional margin and longer wait times.
Tip: The above is for information sharing only and not investment advice. Please be sure to do your own research!
Diligent DeFi enthusiast: BitHappy