How to Automate Arbitrage Alpha with Hot Tub Vaults
In this guide, we’re going to show you how to automate arbitrage alpha with a walkthrough of the Hot Tub vaults. To learn more about the strategy powering the Hot Tub, check out this explainer 👉
How to Join the Hot Tub
To turn up the heat on your crypto game with Hot Tub, visit vaults.perp.com and connect your wallet.
Note that the only wallets supported at launch are Coinbase, MetaMask and WalletConnect-enabled ones.
Select your preferred wallet type and once you have connected, you’ll see the last 4 characters of your wallet address on the top right-hand side of the page.
The main Hot Tub page shows a description of both vaults, the 7-day APR percentage and the deposits as a percentage of the vault’s cap.
Select which Hot Tub vault you want to join by clicking on it. If a vault is currently full, you can join the queue and earn yield through the Shower Room while you’re waiting. Once a spot is freed up in the Hot Tub vault you queue up for, your deposit will be automatically added.
If the vault you are interested in is full, click “Queue”, then approve the amount you want to add to the Shower Room and then deposit the funds.
You’ll be given a place in the queue and earn yield on your assets through Yearn’s Optimism vaults. Click on view details to show your place in the queue, the estimated APR you’ll earn and the option to be notified via email about your queue status, new vault launches and more.
If you need assistance when using the Hot Tub vaults, click on the icon at the bottom right-hand side of the Hot Tub page to open a support ticket.
Relaxing and Stacking Stables in the USDC Vault
The USDC vault page displays the same information as the main page, but also shows the share price, vault share/cap and total value locked. Click on the panels at the bottom to learn more about the Hot Tub with an overview of the vaults, an explanation of the strategy, as well as the benefits and risks.
Click on ‘Deposit’. You’ll need to confirm a one-time approval to allow the vaults to use the USDC in your wallet. Enter the amount you want to deposit and click on ‘Approve’.
Once this transaction has been confirmed, the amount of funds you have approved can then be added to the vault by clicking on the ‘Deposit’ button.
Sign the transaction to process the deposit. In return for USDC and to represent your share of the vault’s holdings, you’ll receive HT-ETH-USDC tokens. The amount of tokens you receive when depositing is calculated as:
USDC amount / current share price = HT-ETH-USDC tokens
After you have added funds to the vault, a pop-up will confirm that it has been successful and the page will be updated with the share value in USDC and the number of shares. As more arbitrage opportunities are detected and executed, the value of the HT-ETH-USDC tokens increases.
Now all you have to do is sit back, relax and enjoy earning an effortless stablecoin yield from the arbitrage strategy!
The history button lets you track all of your past deposits and withdrawals for the vault. You are free to withdraw your share of the profits whenever you want!
There are no fees for withdrawals for limited time only. Select the amount of shares you wish to withdraw and click on ‘Withdraw’. For security reasons, a 15-minute cooldown period is applied after depositing.
After clicking on the withdraw button, confirm the transaction to redeem your tokens for the USDC that were initially deposited, as well as your share of any profits generated by the vault’s strategy.
Whirling and Earning with the ETH Vault
For the ETH vault, you’ll need to deposit wrapped ETH (WETH). Note that the wrapped ETH will always be redeemable at a 1:1 exchange rate with ETH, and you can convert between the two using Jumper Exchange here.
Once clicking on the vault, you’ll see more details and your shares, as well as options to deposit or withdraw.
Click on ‘Deposit’ to join the vault. There’s an option to wrap ETH (highlighted below) just in case you only hold ETH in your whitelisted wallet, which will take you to Jumper Exchange.
If you only have ETH on Optimism, go to ‘Select chain and token’ using Jumper Exchange.
Enter the amount you want to wrap and click on ‘Review swap’.
Sign the transaction and a pop-up will confirm that the swap has been completed.
You’re now ready for the Hot Tub! Now go back to the ETH vault page to start effortlessly earning sustainable yield.
Enter the amount of WETH you want to deposit, click ‘Approve’ and sign the transaction in your wallet.
The transaction should be confirmed quickly, after which you can click on ‘Deposit’ to add WETH to the vault and start earning arbitrage profits!
In return for WETH and to represent your share of the vault’s holdings, you’ll receive HT-ETH tokens. The amount of tokens you receive is calculated as:
WETH amount / current share price = HT-ETH tokens
After you have added your funds, a pop-up will confirm that your deposit has been successful and the page will be updated with the share value in WETH and the number of shares. Over time as more arbitrage opportunities are detected and executed, the value of the HT-ETH tokens rises.
All that’s left to do is to unwind in the Hot Tub stress free, as your WETH holdings will grow over time as the strategy automates arbitrage profits for you!
As with the USDC vault, you’re free to withdraw your share of the profits whenever you want! There are no fees for withdrawals for an unspecified period from launch. Click on the ‘Withdraw’ button and select the amount of shares you wish to convert back to WETH. For security reasons, a 15-minute cooldown period is applied after depositing.
To redeem the HT-ETH tokens for WETH, click on ‘Withdraw’ and confirm the transaction. You’ll receive the amount of WETH that was initially deposited, as well as your share of any profits generated by the vault’s strategy.
Make sure you familiarize yourself with the potential risks. Although the strategy has minimal risk, there are some low likelihood scenarios where a negative return is possible (mentioned on each vault’s page). This means under extreme circumstance, you may lose some of your initial capital and will only be able to withdraw a lower amount.
Tips for Maximizing Your Earnings
To make the most of the Hot Tub, here are 3 tips to consider:
Once you join the Hot Tub, sit back, relax and stay for as long as possible to generate a higher return. Over extended periods, there’s a greater chance of volatile events occurring, where the strategy will perform more arbitrage trades. Under volatile market conditions, the market moves quickly and more price discrepancies arise. With a higher number of arbitrage opportunities, the strategy generates greater profits for depositors.
Your deposit amount determines the share of the arbitrage profits you’ll receive. If your funds account for 5% of the vault, then you’ll earn 5% of the arbitrage profits. By increasing your share of the vault’s total value locked to 10%, that will then entitle you to 10% of the profits.
Join both vaults to earn yield on WETH and USDC at the same time! Once your address has been whitelisted, you’ll be free to dip into both vaults.
And that concludes our step-by-step walkthrough of the Hot Tub vaults.