Introducing Hot Tub: How Perp is Democratizing Arbitrage Alpha

Our Hot Tub vaults make alpha accessible to all through an automated arbitrage strategy!

Want to unlock passive earning opportunities through a non-directional trading strategy? Let Hot Tub do the hard work for you!

No longer do you have to shed blood, sweat and tears to find reliable yields with minimal risk. As part of Perp’s exploration of vaults, two automated strategies will soon be launched that generate profit through a delta neutral trading strategy.

Our upcoming vaults enable you to reach new heights in your cryptocurrency journey, where profiting from arbitrage alpha will soon be accessible to all! Relax in the Hot Tub, turn up the heat on your crypto game with a low-risk yield and grow your ETH or USDC stack!

What is Arbitrage Anyway?

Arbitrage is, in theory, a risk-free trading strategy since it involves buying an asset at a low price then selling it somewhere else for a higher price. Although in practice arbitraging is not entirely risk free, it is one of the most sustainable sources of yield in the crypto market.

However, arbitrage requires a trader to somehow automate this strategy.

This means you’d need some coding skills, a way to monitor opportunities as well as enough capital to make arbitraging worthwhile. Some crypto users, especially those new to the market, may not have the capital, technical knowledge, or time to do this on their own.

But this is where Hot Tub comes in, which automates arbitrage profits to make alpha accessible to all! By turning a sophisticated arbitrage strategy into a simplified vault that’s both easy-to-use and non-custodial, anyone can enjoy a steady return without needing any coding or trading knowledge!

How Hot Tub Works

The Hot Tub vaults will offer depositors a return on their assets by executing an arbitrage strategy for ETH-USD on Optimism, capitalizing on price differences between the perpetual swap market on Perp and spot markets on decentralized exchanges (such as Uniswap and 1inch).

Funds put into either vault by depositors will be pooled together, generating a return whenever there are profitable opportunities. For instance, if the price of ETH on Uniswap is lower than it is on Perp, then the USDC vault will buy some spot ETH. Simultaneously, the same amount of ETH is shorted using perpetual swap contracts to maintain delta neutrality.

As the prices of ETH on Uniswap and on Perp converge, then the short ETH perpetual position can be closed and the spot ETH can be sold for USDC on Uniswap. After these trades have been executed, the USDC vault realizes a risk-free profit for depositors. In practice, arbitrage trades will be conducted across different spot DEXes on Optimism.

A similar strategy is utilized for the ETH vault. It’s your call which vault you deposit to and whether you earn a yield denominated in ETH or USDC.

Our Hot Tub release provides a new opportunity for yield seekers following the collapse of trust in the ‘CeDeFi’ sector. Built entirely on-chain for full transparency, jump into the Hot Tub to experience the convenience and efficiency of automated smart contracts while retaining custody of your funds.

Turning Up The Heat on Your Crypto Game

Here’s how Hot Tub turns up the heat on your crypto game:

  • Earn a steady yield (5%+), with relatively low risk compared to other vaults, in either ETH or USDC

  • No fees for a limited time only. Depositors will not be charged any fees, so sign up today for access to our whitelist

  • Unlike most vaults in the market that run in epochs or rounds, Hot Tub allows users to deposit or withdraw at any time

  • Fully on-chain, secure and non-custodial

  • These vaults (and planned future releases) directly contribute to making Optimism’s DeFi markets more efficient

Access to the Hot Tub is now open to all! Join the Shower Room, our queueing mechanism, to earn yield through Yearn while you wait for space to be freed up in the Hot Tub.

Learn more about the Shower Room in the post linked below.

The strategy shares profits between depositors, who receive an amount proportional to the amount of capital they add to the vault. The performance of the USDC vault over the past month shows that it has delivered a 6.61% APR. The ETH vault also performed well in a live trading environment, realizing a 10.97% APR.

In an upcoming article, we’ll dive deeper into the Hot Tub strategy and illustrate the resilient performance of these vaults under different market conditions. No matter whether the market is in a bubble or not, Hot Tub delivers a stable yield that you can rely on.

Still have more questions? Learn more about the specifics of Hot Tub here.

The Future of Hot Tub

The vision for Hot Tub extends much further than the launch of ETH and USDC vaults, which just scratch the surface of the potential for trustless, on-chain trading strategies.

More vaults are being explored for future releases that will enable you to grow your crypto holdings other than ETH and USDC by capitalizing on a wider range of arbitrage opportunities.

Another avenue of research is extending the strategy to become ‘cross-chain’ to earn risk-free profits from price differences on Optimism and other ecosystems. The opportunities are limitless and this is just Perp’s first step in providing a suite of products focusing on passive trading strategies.

You don’t need to be a gigabrain to seek out and earn yield in crypto! Hot Tub vaults do all of the hard work for you, while there’s also absolutely no reliance on a custodian or third party.

How to Join

Start earning yield in WETH, WBTC, OP and/or USDC with the Shower Room and claim your place in the queue for the Hot Tub here:


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