# Peg Arbitrage Mechanism

There is one presently available trade strategy available to users to profit from a price dislocation of *USDe* in external markets from what it is actually worth:

**Cross Market Arbitrage:** purchasing or selling USDe into the protocol mint & redeem contract when USDe price has diverged from $1.

## Trade Strategies

It's important to keep in mind:

* *USDe* is backed strictly by the protocol backing assets. 
* *USDe* is able to be **minted** & **redeemed** on demand by authorized, whitelisted users. This means that at any time, approved users are able to ramp in & out.
  * about 0.50% of backing assets are typically held in stablecoin form and available in the Minting Smart Contract to enable on-demand redemptions. This balance is systematically replenished from the 4% of the backing assets of *USDe* held in stablecoins that are readily available from multiple custodians.
* The value & amount of *USDe's* underlying backing is generally unaffected by any dislocations or rapid movements of price across any Centralized/Decentralized Spot Market, AMM Protocols, etc., though fluctuations in those markets may cause temporary dislocations in the secondary market price of *USDe* as the market's "reference assets" for the target peg.
* The value of the reserve underpinning *USDe* is generally unaffected by the removal of liquidity in volatile markets.

### 1. Cross Market Arbitrage

This strategy enables any user approved to mint/redeem to profit from the difference between the price/amount users' are able to **mint**/**redeem** *USDe* with Ethena & the value of *USDe* in an external market. An external market includes all centralized & decentralized spot markets such as "USDe/USDC" and AMM Protocols such as Uniswap or Curve. <img src="https://lh7-us.googleusercontent.com/docsz/AD_4nXe3W4OFZkxbBozA5Xid5BKDx_eBTrSwGn57b4eH1-tjHkZG784up8qbzDg-LDF57l1g5SAy3tFgnJFe7V9vfjhpKgB-Tv-hUBtwf_VEbkIr7xueN1AS1cjxoxVmei4DTaYjHCqOm6ynUCNOMI1WT8Xct2cE?key=LQPGPTylFgZCiOSN3cvgEA" alt="" data-size="original">

If *USDe* is worth **LESS** in an external market than from Ethena directly, a user could:

1. Buy 1x *USDe* at 0.95 from Curve using *USDT*.
2. Redeem 1x *USDe* at 1.00 from Ethena receiving *USDT*.
3. Profit.

![](https://lh7-us.googleusercontent.com/docsz/AD_4nXfl7pvmWxGSYQbfq7OkGYBrAbd-IuQ29HUesLZZ2kwsd6nVjuXrk4f2Sr9mFuJpRCELN5vIM7zweqE1g510kaMCb0W1swWiw38vPp7tyu5_IOGQoMxrrpoosndZeAu1oKJKPNJ6e-R5vEjbCd7EuSImStOv?key=LQPGPTylFgZCiOSN3cvgEA)

If *USDe* is worth **MORE** in an external market than from Ethena Labs, a user could:

1. Mint *USDe* using *USDT* from Ethena.
2. Sell the *USDe* in the Curve pool for > 1.00 for *USDT*.
3. Profit.


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