1️⃣Scenario 1 - ETH Price Rises

1. Minting $aETH:

  • Inherent Value: As ETH's value rises, the inherent value of each $aETH token, which mirrors ETH, also strengthens.

  • Increased Attraction: Users see the benefit of minting $aETH during ETH's upswing, as the token seizes and magnifies ETH's price progression.

  • Tax Mechanism: Each minting action incurs a 1% tax. Beyond ensuring stability, this tax fortifies continual price appreciation of $aETH due to 50% of the tax being reinvested into the $aETH contract.

2. Trading Dynamics:

  • Liquidity Pool Lags: When ETH prices spike, the $aETH liquidity pool rate might trail behind the updated minting price.

  • Arbitrage Opportunity: This delay presents a prime arbitrage chance. Traders can buy $aETH at a lower rate from the liquidity pool and then burn it via the contract in order to redeem $ETH for a more favorable rate.

  • Balancing Act: As arbitrageurs capitalize on this disparity, the increased buying pressure in the liquidity pool gradually pushes the price of $aETH up, recalibrating it closer to its peg with ETH.

3. Liquidity and Stability:

  • Boosted Liquidity: A rising ETH price, coupled with $aETH's unique appeal, may pull in more liquidity as users increasingly opt to pair $aETH with $USDC in liquidity pools.

  • Merits of Increased Liquidity: A fuller liquidity pot promises enhanced price stability. Plus, with a broader base of $aETH-$USDC pairs, $aETH can exploit ETH's volatility more fruitfully, yielding a resilient counter to broader market price swings.

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