Arbitraging

If pools are imbalanced for swaps or perps, arbitraging can be done to gain a profit while helping to balance the pools.

Swaps​

For swaps, positive price impact can be arbitraged.

For example, in the ETH-USDC pool, if the USD value of ETH in the pool is more than the USD value of USDC in the pool, then there would be a positive price impact to swap USDC for ETH. This positive price impact would result in additional ETH being received for a USDC to ETH swap.

Pool balances can be viewed on the Axiodex Stats page.

Perps​

For perps(perpetuals), positive price impact and funding fees can be arbitraged.

For example, if there are more ETH long positions than short positions then there would be a positive price impact to open ETH short positions, this would result in a better entry price than the current market price. The position would also earn funding fees while it remains open.

If in the same scenario, the ETH long positions close such that there are more shorts than longs, then there would be a positive price impact to close the long position, this would result in a better exit price than the current market price.

For markets where the index token is the same as the collateral token, e.g. using ETH collateral in the ETH perp market, delta neutral positions can be opened by using the collateral token to open a short position. Conversely, when arbitraging with long positions, a 1x long position can be opened using a stablecoin as collateral, this would lead to 1x exposure to the index token.

Note that funding will tend towards zero as the long / shorts become balanced, this should be considered when deciding on the position size to open for arbitrage.

Pool balances and funding rates per hour can be viewed on the Axiodex Stats page.