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Offline Azuos

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Pegging & supply, help me understand
« on: October 14, 2014, 03:39:27 PM »

I am trying to understand the implications of market pegging, price, supply and their interactions.  I am probably missing something or making assumption that aren't valid so please help me.

The situation troubling me is that if the peg for BitUSD holds at a 1:1 ratio and liquidity and access increase to the point where the BitUSD and USD become almost interchangeable.  This situation would seem to be akin to increasing the supply of USD and hence should have the effect of inflating the asset BTSX pegs to.  At 60mil market cap, the effect now is minuscule but you can take this line of thinking as far as you want with competing coins etc. and the effect on finite assets (BTC, Gold..) could be substantial.

What am I missing?
Thanks

Offline yellowecho

Re: Pegging & supply, help me understand
« Reply #1 on: October 14, 2014, 04:19:16 PM »
Quote
This situation would seem to be akin to increasing the supply of USD and hence should have the effect of inflating the asset BTSX pegs to.

I think you're missing the simple fact that money moving into bitUSD has to come from somewhere.  BitSharesX is a bank and exchange so it basically converts existing BTC, USD, EUR, RMB, etc into collateralized bitAssets shifting risk not creating or destroying value.
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Offline sschechter

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Re: Pegging & supply, help me understand
« Reply #2 on: October 14, 2014, 04:49:14 PM »
This already happens in world derivative markets.  The answer is the effect is irrelevant.  Trading will continue as normal.
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Offline Mysto

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Re: Pegging & supply, help me understand
« Reply #3 on: October 15, 2014, 12:01:58 AM »
Great post and great replies. I was actually thinking about this myself!

Offline biophil

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Re: Pegging & supply, help me understand
« Reply #4 on: October 15, 2014, 12:31:22 AM »
Great post and great replies. I was actually thinking about this myself!

Yeah, I've seen this question come up before, and I prefer the answers this time around.

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Ggozzo

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Re: Pegging & supply, help me understand
« Reply #5 on: October 15, 2014, 05:08:13 AM »
In order for bitUSD supply to increase, the price of BTSX has to increase. Right? Since collateral is required to create bitUSD, only half of the BTSX market cap can be created into bitUSD at any given time excluding all other assets. So it would theoretically always be less than half the BTSX market cap. And then, would $1 billion bitUSD in circulation require at a minimum of a $2 billion market cap? 

 

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