Lifechange arbitrage
Lifechange arbitrage usually occurs in project hacks when the price of an asset drops sharply on the DEX (a so-called “Flashcrash”). At that moment, significant spreads between DEX and other exchanges appear. The realization of such opportunities can bring large profits - from thousands to tens of thousands of dollars, which is called “Lifechange”.
Arbitrage Scenarios:
One of the first to see a major drop on DEX, manage to buy “at the bottom” and send tokens to CEX, where the price is many times higher
Advantages:
First to get the best spread as a rule
Quick profit here and now
Disadvantages:
You need to be one of the first to send tokens to CEX, which is quite difficult
If you procrastinate, CEX usually closes and blocks deposits 5-15 minutes after a major token drop, and your deposit will be stuck indefinitely with no way to withdraw or sell tokens
Even if the deposit was credited and you managed to sell tokens to a good profit - it's better to withdraw the money from the exchange right away, as it may freeze it/cancel the sale/block the account
Recommendation:
Send only a part of tokens (50%) to CEX, so that in case of blocking a part of tokens will remain in your possession and thus reduce the risks of losing all funds
Wait until the price drop starts to stop (hacker sells all stolen tokens or gets blocked) and buy back “at the bottom”. Do not send tokens anywhere, but wait for full/partial recovery of the token price
Advantages:
Large enough time window to buy “at the bottom”, anyone can manage to do so
Full control over your assets - less risk, as you can sell at any time
If you buy back “one of the first”, a certain profit due to the purchases of other arbitrageurs will be at once
Disadvantages:
Potentially less profit, as the price rarely quickly recovers to its original values
No guarantees that the price will recover
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Example:
DJT / SOL -66.7% 06.10.2024
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