Asymmetric risk-reward trade/investment opportunity with Century Mining Event: Carry Trade
As you know, USDT and USDJ can be staked for returns in TRX and other TRON-based currencies via Century Mining on the TRON platform. At present, these are yielding approximately 10% and 17% APY, respectively. This presents an asymmetric trade/investment opportunity by way of a carry trade. The rewards likely outweigh the risks in this trade. You can borrow from the bank for about 3% APY, use these funds to stake in USDT or USDJ and profit from the difference (currently a profit of 7% and 14%, respectively).
Assuming that Century Mining proceeds for approximately 6 months, the maximum loss (risk) is approximately 1.5% (3% APY over a 6 month period; this is estimated based on withdrawal of funds after 6 months to repay the loan, not 12 months for a typical 12-month loan period). The rewards are theoretically infinite but if the current ROI from USDT/USDJ staking remains consistently, then we can expect between 7-14% APY in profit.
There are risks, however. They include:
- Variations in ROI from USDT/USDJ staking, influenced by demand for staking in this pool
- Volatility in price of reward tokens (TRX, JST, SUN, BTT, WIN, BTCST)
- Bid-ask spread when converting from USD fiat to USDT or USDJ
- User-specific risks, such as having the account hacked
All in all, this would be considered an asymmetric trading/investment opportunity because the risks are quite limited, while the rewards are likely several fold higher.
Please feel free to share your thoughts on the matter.