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Offline speedy

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What if BitAsset holders refuse to sell?
« on: November 14, 2014, 12:06:21 PM »

Sorry if this is an old conversation:

Right now the BitBTC market is thin - no one is shorting or selling any BitBTC. You could theorize that anyone who currently does hold BitBTC is short-term bearish on BTS.

So ive been contemplating what if someone does have a largish amount of BitBTC right now and refuses to sell it? If BTS were then to drop by 50% there is no one who is selling BitBTC which can be used to cover short positions. To someone new to BitShares, it seems to be a matter of blind faith that the lead developers wont dump and crash it 50% causing a blowout in the BitBTC peg.

The BitUSD market is less vulnerable because its volume is large.
« Last Edit: November 14, 2014, 01:17:28 PM by speedy »

Offline Markus

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Re: What if BitAsset holders refuse to sell?
« Reply #1 on: November 14, 2014, 12:59:07 PM »
Sorry if this is an old conversation:

Right now the BitBTC market is thin - no one is shorting or selling any BitBTC. You could theorize that anyone who currently does hold BitBTC is short-term bearish on BTS.

So ive been contemplating what if someone does buy a largish amount of BitBTC right now and refuses to sell it? If BTS were then to drop by 50% there is no one who is selling BitBTC which can be used to cover short positions. To someone new to BitShares, it seems to be a matter of blind faith that the lead developers wont dump and crash it 50% causing a blowout in the BitBTC peg.

The BitUSD market is less vulnerable because its volume is large.
How could someone buy a large amount if no one was selling?

Offline speedy

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Re: What if BitAsset holders refuse to sell?
« Reply #2 on: November 14, 2014, 01:08:03 PM »
Good point, but there is currently 46 BitBTC already in existence. None of those holders are selling. Their private keys could be lost for all we know.

I edited my OP to address your point.
« Last Edit: November 14, 2014, 01:18:08 PM by speedy »

Offline vegolino

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Re: What if BitAsset holders refuse to sell?
« Reply #3 on: November 14, 2014, 02:11:27 PM »
Maybe somebody bought BTC after seeing that very soon some shorts are expiring and wishes to sell BTC at profit to those shorts.

Offline biophil

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Re: What if BitAsset holders refuse to sell?
« Reply #4 on: November 14, 2014, 02:29:41 PM »
Sorry if this is an old conversation:

Right now the BitBTC market is thin - no one is shorting or selling any BitBTC. You could theorize that anyone who currently does hold BitBTC is short-term bearish on BTS.

So ive been contemplating what if someone does have a largish amount of BitBTC right now and refuses to sell it? If BTS were then to drop by 50% there is no one who is selling BitBTC which can be used to cover short positions. To someone new to BitShares, it seems to be a matter of blind faith that the lead developers wont dump and crash it 50% causing a blowout in the BitBTC peg.

The BitUSD market is less vulnerable because its volume is large.

Another point is that as the BTS price decreases, the incentive to sell bitBTC increases. If BTS drops 50%, someone holding bitBTC could sell it for a 2x profit. The higher that profit goes, the fewer people are just going to hodl.

But the cool thing is that it doesn't actually matter if the hodlers sell, since we could just short sell! If BTS drops 50% tomorrow, I'd be more than happy to short bitBTC, and I'm sure I'm not the only one.

The funny thing is that bitBTC has consistently been a "better" peg than bitUSD in the sense that it pretty much never trades at a discount to real BTC. Of course it doesn't have the liquidity of bitUSD, but the buy wall is almost always below the feed price and the sell wall is almost always above it. Contrast this with bitUSD, where the sell wall is absolutely never above the feed price.

Offline Frodo

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Re: What if BitAsset holders refuse to sell?
« Reply #5 on: November 14, 2014, 02:37:59 PM »
I have thought about this too.

The point is that all shorts have to cover after one month, which means not all shorts have to cover at the same time and the supply never has to go to 0.
Differently said, if no one is willing to sell say bitUSD and a large short has to be covered s.o. will short sell this bitUSD. (because the price gets pushed over the peg and market makers will use this opportunity)

So let's assume someone bought 10 bitUSD and lost his priv keys. This guarantees that at all times at least one short order worth 10 bitUSD is open. And at least every one month a new short is created to cover the old one. Another effect is, that this effectively decreases the BTS supply, which makes perfectly sense.
« Last Edit: November 14, 2014, 02:43:03 PM by Frodo »

Offline speedy

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Re: What if BitAsset holders refuse to sell?
« Reply #6 on: November 14, 2014, 03:25:53 PM »
Another point is that as the BTS price decreases, the incentive to sell bitBTC increases. If BTS drops 50%, someone holding bitBTC could sell it for a 2x profit. The higher that profit goes, the fewer people are just going to hodl.

But the cool thing is that it doesn't actually matter if the hodlers sell, since we could just short sell! If BTS drops 50% tomorrow, I'd be more than happy to short bitBTC, and I'm sure I'm not the only one.

Thanks that makes sense - the more they refuse to sell their BitBTC, the more tempting it is to create a new short. And a thin market such as BitBTC means that a new holder can choose whatever sell price he likes for his new BitBTC, and take all of the shorters collateral.

i.e. incentives will keep the system working forever.

 

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