By Tom Blitzer
Key Insights:
- Multichain’s $125M outflow sparked an unprecedented crypto arbitrage, shaking the blockchain ecosystem.
- An opportunistic trader masterminded a hefty payday using discounted USDC and an unsuspecting online casino, BC Game.
- The ingenious feat underscored blockchain dynamics and the need for robust security in crypto trading.
The enigmatic world of cryptocurrencies has recently witnessed what experts deem the most ingenious arbitrage in its tumultuous history. The incident, engendered by a disconcerting outflow of funds from the cross-chain router protocol, Multichain, demonstrated the extraordinary interplay between different blockchain ecosystems and their limitless opportunities for savvy traders.
Multichain’s Meltdown: A Prelude to Opportunity
A disquieting sequence of events was initiated earlier this month when over $125 million unexpectedly flowed out from Multichain. Consequently, crypto assets on the Fantom blockchain, heavily reliant on Multichain for stable trading prices, underwent a stark devaluation.
USDC, a crypto asset typically pegged to the US Dollar, was one such asset that found its value severely undermined. Unthinkably, USDC was trading at an astonishingly low $0.50 on the Fantom network, a massive deviation from its standard dollar parity.
Masterminding a Massive Payday Through Arbitrage
Capitalizing on minor price differences of the same asset across diverse markets, Arbitrage took center stage in this drama. Enter an opportunistic trader, known only by the first few characters of their address, 0xfad7. This trader spotted the chance to make a profitable play, leveraging the discounted USDC.
With an intelligent strategy, the trader began transferring Fantom’s native token, FTM, from centralized crypto exchanges to the Fantom network. The undervalued USDC was purchased with these tokens at a staggering 50% markdown.
However, the real genius behind this maneuver lay in its next phase. The discounted USDC was then deposited into an unsuspecting online casino, BC Game, which accepted stablecoin deposits. The casino credited the total face value of the USDC to the trader’s account, blissfully unaware of the stablecoin’s devaluation. This process was repeated several times, ironically driving the USDC price back up to $0.90, just a dime short of its usual standing.
Ultimately, this astute trader cashed out the casino credits, netting several hundred thousand dollars in pure profit. The feat is being lauded as the “smartest arb in crypto history” by Jeff Dorman, the chief investment officer at the trading outfit Arca.