This article is from: Tiao.sol
Compiled by Odaily | Translator: Azuma (@azuma_eth)
Editor's Note:
On March 6, market rumors suggested that Coinbase was considering restarting its plans to tokenize its stock COIN and other securities. In 2020, Coinbase had previously attempted this, but abandoned it due to regulatory hurdles. With the SEC's new crypto-asset working group, Coinbase seems to see an opportunity to revive this plan.
Just two days later, the RWA project Backed announced on March 8 that it had launched a Coinbase stock derivative token wbCOIN on the Base network, with the token's value backed 1:1 by COIN stock. While Backed claimed this was unrelated to Coinbase, the speed of this action makes it hard not to speculate.
Over the weekend, crypto analyst Tiao.sol posted on X, analyzing the potential arbitrage opportunities between the two markets under the "stock-crypto parallel" model, which may provide some new trading inspirations in the face of the current market uncertainty.
The following is the original content, compiled by Odaily.
With Backed launching a tokenized version of Coinbase stock (wbCOIN) on the Base blockchain, it seems that the SEC's regulatory barriers have been completely opened. This may mark a transformative change in the financial markets, hinting that other US stocks may soon be tokenized. For traders, this not only brings new market opportunities, but also introduces unique trading strategies.
In the following, I list several potential arbitrage opportunities and strategies, welcome everyone to discuss and supplement.
Opportunity 1: Price Arbitrage
Scenario
The traditional US stock market may experience violent fluctuations due to news, macroeconomic data, or corporate events (such as earnings releases), while the tokenized stocks (such as wbCOIN) may not be able to immediately reflect these changes due to lack of liquidity or delayed price data.
Strategy
Monitor the price difference between the traditional market (such as Coinbase stock COIN) and its tokenized asset (such as wbCOIN). If COIN experiences a significant drop (or rise) in the traditional market, while wbCOIN reacts with a lag in the crypto market, traders can buy (or sell) COIN at a lower (or higher) price in the traditional market, and simultaneously sell (or buy) wbCOIN at a higher (or lower) price in the crypto market.
Risks
Price data delays, high transaction fees, blockchain network congestion, and legal risks between the token and the actual stock value (such as the token failing to effectively anchor the stock).
Example
If COIN drops to $200 in the traditional market, but wbCOIN still maintains at $205 due to liquidity issues, the trader can buy COIN in the traditional market and sell wbCOIN in the crypto market, locking in a $5 profit (after deducting fees and slippage).
Opportunity 2: Liquidity Spread Arbitrage
Scenario
The liquidity of tokenized stocks in the crypto market is usually lower than the traditional US stock market, especially during low trading volumes, the bid-ask spread is often quite large.
Strategy
Buy the stock (such as COIN) at near-market prices in the traditional market, convert it to a token (such as wbCOIN) through blockchain mechanisms (such as Base or other DeFi platforms), and then sell it at a premium in the crypto market. Alternatively, provide liquidity (as a market maker) in the low-liquidity market and profit from the bid-ask spread.
Risks
Low liquidity may limit trading volume and make it difficult to exit quickly; the on-chain gas fees may also erode profits.
Example
If the buy price of wbCOIN is $205 and the sell price is $210 on AerodromeFi or CoWSwap, the trader can provide liquidity by placing buy and sell orders, earning a $5 spread.
Opportunity 3: 24* 7 Time Arbitrage (Time Zone Arbitrage)
Scenario
The traditional US stock market is only open from 9:30 AM to 4:00 PM Eastern Time on weekdays, while the tokenized stocks trade 24*7 around the clock. This provides an opportunity to leverage global market fluctuations during the US market's closed hours.
Strategy
After the US market closes, the global market (such as Asia or Europe) may affect the price of Coinbase or other US stocks due to news or events, while wbCOIN in the crypto market may not have fully adjusted. Traders can buy (or sell) wbCOIN at a lower (or higher) price in the crypto market and wait for the price to correct when the US market reopens.
Risks
Violent price fluctuations may lead to losses; the token price may deviate from the true value due to low participation.
Example
After the US market closed on Friday, an event in Asia boosted the prospects of Coinbase, but wbCOIN had not yet risen. The trader can buy wbCOIN at a low price in the crypto market and sell it when the US market reopens on Monday.
Opportunity 4: Cross-Market Arbitrage
Scenario
Tokenized stocks are often traded 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 differences between different platforms.
Strategy
Monitor the prices of wbCOIN or other tokenized stocks on various platforms. If the price on Base is lower than the price on Ethereum or the traditional market, traders can use cross-chain bridges or traditional market entry/exit channels to buy at a lower price on one platform and sell at a higher price on another.
Risks
Cross-chain transaction delays, relatively high gas fees, and regulatory differences between platforms.
Example
If the price of wbCOIN is $200 on Base, but $205 on Ethereum, the trader can buy on Base and sell on Ethereum, earning the spread (after deducting cross-chain fees).
Opportunity 5: Event-Driven Arbitrage
Scenario
Major events (such as Coinbase earnings, regulatory news, or hacking attacks) may lead to asynchronous price movements between traditional stocks and their tokenized versions.
Strategy
Predict events that may impact Coinbase or other US stocks (such as changes in SEC policies, mergers, acquisitions, etc.), predict price movements, and trade on the price differences between traditional stocks and their tokenized versions after the event.
Risks
The outcome of the event is highly uncertain; the price may further deviate from expectations.
Example
If Coinbase releases a positive earnings report, COIN rises 10% in the traditional market, while wbCOIN only rises 5% due to low liquidity, the trader can buy wbCOIN at a low price in the crypto market and wait for the price to correct.
Key Factors
Sufficient liquidity: The current liquidity of tokenized stocks is still relatively low, which to some extent limits the scale of arbitrage.
Fees and slippage: On-chain gas fees, traditional market commissions, and transaction fees in token trading may erode profits.
Summary and Recommendations
With the launch of wbCOIN, tokenized versions of other US stocks (especially those with high liquidity and brand recognition, such as Apple, Amazon, and Tesla) are expected to gradually go on-chain.
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 various potential arbitrage opportunities.
In terms of tools, I would recommend using real-time market data tools (such as TradingView, CoinGecko) and blockchain analysis platforms (such as dune analytics) to track prices and liquidity. At the same time, set strict stop-loss and take-profit levels, monitor gas fees and slippage, and ensure that profits can cover the costs.
