The X8 project was not designed with the intention to provide the possibility of arbitrage to market participants. However, as things stand, arbitrage using the X8C token might be possible. We wish to stress that the X8 team neither encourages nor endorses this practice. We are writing about it because the subject has been brought up by the community. Arbitrage will likely not be something that can be done with ease and it will carry risk.
Two scenarios come to mind where arbitrage will be possible. For our examples we will assume that X8C token has its intrinsic or fair value fixed at 1 USD. The intrinsic value is the value a holder gets for an X8C token when exchanged on our platform regardless of the situation on the markets. We also assume X8C is available on public exchanges.
SCENARIO 1: SEVERE DOWNTURN OF THE MARKETS
In such situation we can assume that everybody is looking for ways to preserve the value of their portfolios. Traders are looking for assets that are considered more stable (like direct exit to a fiat currency, USDT, etc.). With X8C on exchanges, traders can of course also rush to it. Thus, demand rises and the price is pushed upwards resulting in the fact that 1 X8C is now worth for example 1,10 USD. We are speaking about the value on exchanges, of course. That would mean a 10% advantage over the fair price. This gives a holder of X8X tokens the following opportunity: they can now buy X8C from our fund manager at the fair price of 1 USD and sell on exchanges at 1,10 USD.
SCENARIO 2: BULLISH TREND
This is the opposite case from the situation above. As everything is on the rise, traders are exiting more stable assets and looking for the next coin whose value is expected to shoot up. Thus, demand for X8C on exchange decreases and the price could fall below its fair price to, let’s say 0,90 USD. This again gives rise to an arbitrage opportunity. A holder of X8X tokens may buy X8C on an exchange and exit through our fund manager at 1 USD.
The objection can be raised that a lot of assumptions have been made. Still, we believe that a simple theory of supply and demand makes a good foundation for plotting market movements.
Please, keep in mind that this possibility of arbitrage is a side effect of the X8 system which resulted from the combination of our token model and a very basic market theory. It is in no way something that was intended. Anything that involves time carries risk on the market and so it is with arbitrage because the transfer from exchanges to X8 platform will not be instantaneous and markets can move in the meantime. Therefore, arbitrage will be an activity in which the trader is the sole carrier of risk and about which X8 team has a clear position as something that is not endorsed.
NB For more info about trading X8C please read the blog post Obtaining X8C With and Without X8X Tokens by clicking here.
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