It seems fairly easy to achieve a Delta neutral return by acquiring usdc, borrowing a more volatile asset (ETH, ARB, etc.) at approx. 50% of USDC worth and then entering the entire amount in liquidity providing strategies.
The only risk I can identify myself is counterparty risk and the opportunity cost of being Delta neutral.
That is:
USDC becomes unpegged to the dollar
The platform you're providing LP to has a security vulnerability
The borrowing platform you're using has a security vulnerability
Considering there is no free lunch, can someone please educate me on what is missing from my thought process?
Edit: because there was some confusion about my poor wording lol.
Take some USDc, provide $750 in collateral at ~6% and borrow $500 ETH at 4%. Take an additional $500 USDc and enter an LP position for USDc/ETH. The short exposure from the loan offsets any price change in the underlying, hedging away price risk.
Hopefully that makes more sense
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