Author Topic: BitBots: concept for low-spread bitasset market maker with guaranteed profits  (Read 1095 times)

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Offline Rune

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Hedging against BTC volatility is already proposed by arhag  (and I have included hedging for the USD if one choses to do that as well) here:

https://bitsharestalk.org/index.php?topic=13375.msg175109#msg175109

Yes. Using internal hedging is actually even more amazing, but will need more liquidity on the DEX before it'll be viable enough to give very low spreads. I wish we had thought of this months ago when nubits first appeared!

I'm gonna be approaching a couple of exchanges as a market maker over the next couple of days. If they have someone offering to do market making they'll likely be much more inclined to list us!

zerosum

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Hedging, internally on the BTS exchange, against BTC volatility is already proposed by arhag  (and I have included hedging for the USD if one choses to do that as well) here:

https://bitsharestalk.org/index.php?topic=13375.msg175109#msg175109
« Last Edit: January 16, 2015, 10:01:16 pm by tonyk2 »

Offline Rune

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With simple open source market making bots we can begin to offer our bitassets for bitcoin at a tight spread and in large quantities at every exchange that lists them.

The concept is pretty simple. The market maker basically runs a bot that buys and sells a quantity of bitassets around the bitcoin price with a small spread. The spread will be determined by the exchange fees + the cost of hedging the bitcoin holdings. I think <1% can be realistically done for USD, and 1% for other assets.

Then within a given amount of time, say every 24 hours, the operator hedges all the bitcoin holdings of the bot by buying leveraged shorting contracts on bitfinex. If the bitasset isn't BitUSD, they additionally do a leveraged hedging from a forex/pm broker, hedging all the USD exposure from the bitfinex short. The lower the fees for the leveraged contracts are, and the more often the hedging is done, the tighter the spread can be offered while still making a guaranteed profit. The only risk will be exchange default risk and counterparty risk of the bot operator (if money is raised through a UIA).

Using this system we can offer a nubits style peg for every bitasset at every exchange!