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Define “Arbitrage” in the Context of Stablecoin Peg Maintenance

Simultaneous buying and selling to profit from deviations from the $1 peg, which naturally restores the stablecoin's market price to its intended value.
Greeks.Live16.11.25

Define “Arbitrage” in the Context of Stablecoin Peg Maintenance.

Arbitrage is the simultaneous buying and selling of a stablecoin to profit from a minor price discrepancy between its market price and its $1 peg. If the stablecoin trades at $0.99, an arbitrageur buys it cheaply and redeems it for $1 of collateral.

If it trades at $1.01, they mint it by depositing $1 of collateral and sell it for $1.01. This action pushes the price back toward the peg.

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