The stock token debate, and the gap nobody can close alone

However, a different picture emerges when the underlying market is closed. Leading up to midnight on Thursday, September 3, Robinhood’s AMC token went from $2.55 to as high as $23.16, which is nine times the $2.54 AMC had closed on NYSE seven hours earlier, before coming back down to $3.26 within the same hour. Volume through the pool during the hour was $10.5 million.

Wrapped tokens such as Robinhood’s AMC are often structured as claims against offshore issuers, which collateralize the tokens with the underlying shares. Theoretically, if the issuer ensures that underlying stock positions and the claims are matched 1:1, the price should align, but in practice, the two instruments are traded separately and can thus diverge. Arbitrageurs, such as high-frequency trading firms and market-making desks, step in to keep markets in line, lock in arbitrage profits, and close any dislocations. The same mechanism keeps depositary receipts aligned with their underlying shares, and ETFs with their net asset value.

In Robinhood’s case, however, the Jersey issuer names only one authorized participant able to create and redeem. The spike fell well inside the hours when it was permitted to do so, but the participant did not mint or burn any tokens at the time. Onchain data shows 47 mints on Friday, Sept. 4, every one between noon and 7 p.m. ET, comfortably inside the cash session, half a day after the token had depegged and recovered.