A recent and quite unusual occurrence in the realm of cryptocurrency trading involved a trading bot that was able to borrow an incredible $200 million using flash loans while only making a pitiful profit of $3.24. The blockchain analysis company Arkham Intelligence discovered the transaction, which revealed the bot’s activities and tactics. The specifics of this intriguing case of flash loan arbitrage are covered in this article.

The trading bot made a $3.24 profit after carrying out a series of trades using flash loans. To put things into perspective, the bot made 0.019 ETH at first, which is comparable to about $33. The net profit, however, was a very meager $3.24 when transaction costs totaling $28.76 were taken into account, along with a $1 payment to the block creator.

In the decentralized finance (DeFi) industry, flash loans have grown in favor of a way to carry out transactions devoid of the need for any kind of collateral. If the borrowed amount is paid back within the same block, these loans allow merchants to borrow significant quantities of money for a single transaction. Complex trading techniques that take advantage of momentary price differences across several platforms are made possible by this special feature.

The bot’s approach

The trading bot used an arbitrage approach, according to Arkham Intelligence’s investigation. It took out a sizeable loan from MakerDAO, a decentralized financial network, for 200 million DAI. The Aave DAI market was subsequently given access to the borrowed cash. The bot then borrowed 1.349 Wrapped Ether (WETH) using the money that was provided. Threshold Network (T) tokens were purchased with WETH on the Curve Finance exchange and immediately sold via the Balancer liquidity protocol.

Key Learnings:

Small Profit: Despite borrowing an incredible $200 million, the trading bot only made $3.24 in profit. The danger and potential unpredictability involved with flash loan arbitrage schemes are demonstrated by this.

Flash Loan Arbitrage: In the cryptocurrency market, flash loans give traders a special chance to profit from momentary price differences. However, carrying out such methods necessitates a thorough comprehension of market dynamics and complex timing.

Complex Transaction Flow: The trading bot’s technique included a number of phases, such as borrowing money, using borrowed assets to leverage the deals, and trading on many platforms before earning a profit. This demonstrates the sophistication and complexity of automated trading in the Bitcoin market.

Risk management: Although fast loans might be profitable, there are also hazards involved. Because of the bot’s low-profit margin, it is crucial to carefully examine transaction costs, market volatility, and any unforeseen circumstances that can reduce profits.

The complexity and dangers of flash loan arbitrage tactics are best illustrated by the example of the cryptocurrency trading machine that borrowed $200 million for a meager $3 profit. The bot’s profit may not seem impressive, but it serves as a reminder of how the Bitcoin market is constantly changing and how traders are coming up with new ways to make money. Flash loan arbitrage is likely to become much more sophisticated as the crypto market develops, needing care, risk management, and a thorough understanding of the market dynamics.