Tokenized stocks can be market-made on Robinhood Chain, but that does not mean merely selecting any pool will yield stable profits.

Written by: Blockworks Research

Translated by: AididiaoJP, Foresight News

Providing liquidity on Robinhood Chain, which pools funds to enter and when to enter, results in significant differences. Some pools' fee revenues are enough to cover the costs extracted by arbitrage, while others effectively yield returns to the counterparties. Especially during opening hours, passive orders almost cannot retain profits.

This is not a slogan, but a cost bill that has already formed on-chain.

Can Fees Cover Arbitrage Costs

Robinhood Chain has been running long enough to address the real concerns of market makers: Can the fees earned by LP cover the profits obtained by arbitragers from stale quotes.

The method of measurement is the loss comparison rebalancing, known as LVR. It measures not directional judgment errors, but the costs incurred from market makers posting outdated prices that are filled by faster traders. In short, if one continues to sell at an old price while others have traded at a new price, the difference is the LVR.

The outcomes of tokenized stock pools vary significantly.

Pools that carry the cash flow of real stocks generally cover costs multiple times over. Stocks against ETH are about 3.3 times the estimated arbitrage cost, stocks against stablecoins about 2.9 times. Stocks against stocks are only 1.02 times, just breaking even. Stocks against memes only cover about 0.2 times.

The average may obscure the degree of dispersion. Most stablecoin pairs and ETH are profitable; about half of stock pairs are profitable; memes have less than 2% profitability on average. Therefore, losses are not an occasional risk but likely indicate that the meme product line is providing liquidity for arbitrage.

The reasons are not complex. Tokenized stocks follow over-the-counter stock prices, which have verifiable external prices. Arbitragers will enter, but with thicker transactions and fees, LP can earn returns. The meme side has larger price swings, thinner depth, and stronger information asymmetry, making posted orders easier targets for counterparties. The fee rate seems not low but still struggles to cover the frequency and extent of being sniped.

Bearable During Trading, Hard to Bear at Opening

Some may think that damage related to stocks occurs after the closing of US markets, while trading continues on-chain as external prices stop. The data does not support this judgment.

From 9:30 AM to 4:00 PM Eastern Time (21:30 to 04:00 Beijing Time), both fees and arbitrage costs are approximately 60% higher, with the ratio between the two remaining nearly unchanged. Trading is more active, but revenues and costs rise in sync, and passive LPs do not get solely harvested post-market.

What truly worsens is the opening period.

At 9:30 AM, the arbitrage cost for a single pool reached $95.08, compared to a pre-opening benchmark of about $7, a 13-fold difference. During the same period, fees only cover 1.05 times, whereas pre-opening often sees coverage of 3 to 6 times. The next period drops to about $41, and the subsequent period to about $24, before returning to tens of dollars within an hour.

This resembles traditional opening auctions: overnight information is released en masse, price discovery is most intense, and quotes lag the most. AMM does not automatically widen the spread nor withdraw orders. If liquidity remains spread here, it will first be swept. Only when the volatility shifts from the opening pulse to intra-day ripples can the rate begin to cover costs again.

Therefore, “average profits can still be made all day” and “profits can be made within ten minutes of opening” are not the same thing. Averages dilute the most painful windows.

Two Decisions: Pairing and Timing

The first is pairing.

Tokenized stocks against ETH or stablecoins have positions with profit cushions. The same stock token against memes mostly sees fees transferring LP profits to arbitragers. Stocks against stocks can average out, but with a win rate of only 57%, the median pool is not worth capital allocation. Market-making should not merely look at headline annualized returns, but at whether the pool has stable, price-effective external flow.

There is also a statistical boundary that must be stated: it only measures the cost of "lagging quotes being executed," not the inventory directional risk. Stocks against memes may incur fee losses, but if memes surge, the inventory side may still bring the total ledger back to positive; the opposite is also true. Fee profits and directional losses can also result in losses. LVR is not the entirety of PnL.

The second is timing.

Passive LPs will be fully consumed during the opening period. Those who can widen quotes around 9:30 AM, reduce depth, or even temporarily exit, are the ones who have the opportunity to maintain a coverage of about 3 times and skip the window where the advantage is nearly zero.

This type of liquidity resembles stocks that require watching for market making, rather than on-chain farming that ends with merely depositing tokens into a pool. Near the opening, it resembles traditional market auctions and price jumps, where passive curves suffer the most; after the price discovery phase, fees can play their role again.

For Those Prepared to Allocate Funds

Bringing stock trading to the chain on Robinhood Chain does not automatically make “providing liquidity” a stable spread business. Profit pools are much closer to stock pairs with external pricing and real currency exchange needs; pools close to memes statistically resemble arbitrage channels. Timing-wise, the truly crucial moment is not night trading, but the opening.

Before entering funds, first ask two questions: Does the pool correspond to ETH or stablecoins, or will it be the volatile meme; Is there someone managing this liquidity before and after the opening? If both questions are vague, no matter how attractive the fee numbers may seem, it is better to clarify positions and routines first.