Recently a new trend in public opinion is that the price of BTS is what it is (low for the general consensus), in significant part somehow due to bad PR moves and blinders. Subsequently the logic is that if we fix the PR we will end up with higher price (or not big sudden price drops for the very least)Well I disagree with that notion. I even strongly disagree with the proposed improvements to the PR – namely total silence, but that is not what this thread is about. I firmly believe that the price reflects what is in the actual product and not how it was presented. In other words what was done (or not done), included or not included in the actual product (software in this case) and NOT how it was presented. Call me stupid, but that’s what I believe.
I want to skim over several factors far more important to the current BTS price. Those are mostly things of the past, mistakes already made and too late to fix. The only value in mentioning them is just a reminder to try and avoid them in the future, if we can.
1. Lack of focus and even to the extent of not believing enough in the fact that the core product is great (should I say revolutionary). bitAssets are the next big thing on the great path that BTC started. But we did not focus on them – we wondered to the great benefits that VOTE can bring losing important time and resources on it. BitAssets were not enough – we needed to have Titan – that added a great complexity slowed down development. Titan and the whole BTC incompatibility lead to very reserved very slow adoption by existing players in the crypto ecosystem (exchanges and off/on ramps being the most painful examples).
I know a big deal of development has been done from October till now… but if you look on the surface, if you just open the main wallet and want to see what has changed from user perspective – not so much – slightly less crash-y client plus maybe almost undocumented escrow and multisig. (Light and web wallet see progress in that time frame – that is true). Months and months spent on battling with our own ‘improvements’ that we unnecessary added to our main product –> bitAssets and exchange.
2. BTS added a great new innovation in the meantime – the ability of a DAC to finance itself! Another revolutionary step.
But man did we choose the most ridiculously stupid way of doing it… Instead of clearly defined projects or workers doing work for the BTS DAC – potentially with clearly defined budgets (read big enough at current market cap, and not excessive at large market caps) and clear separated voting for such project, we decided to go the path of least resistance and twist the delegates system to achieve that. I know that pretty much everybody voiced their opinion in favor of doing it the right way. But the hacky way was chosen (for now) and we are paying for that with underpaid developers or grasping for ways to fix this in some other ways.
After that I want to get to a major contributor to the current price situation. Implementation ‘detail’ that is largely ignored by most everybody. But I do find the issue very significant.
[Short version] The current 300% collateral (200% from shorts) puts the shorts in unnecessarily unfair position. This is a major, major contributing factor for the thin markets on the BTS exchange even now, but will be simply divesting for the future. First the 200% collateral leads to the BTS bulls and market liquidity providers (the shorts) to taking short position with amounts of capital (BTS) not exceeding somewhere between 33% and less than 50% of what they would have done in a just collateral system. And that reduction is simply to balance the unfairness of the system and i.e. to put their max losses in line with their max winnings. Second it reduces the interest rate the shorts are ready to provide. As on average they should be receiving interest not paying one when 200% collateral is required by them. Third - even as we speak the designed and expected total collateral in BTS system is reached or very close to being reached. If we assume that long term 25-33% of all BTS will be held in collateral [1*], the de facto provided collateral by BTS bulls has reached and/or exceeded that level. What it means that even the most bullish BTS holders will not be willing to provide much more new shorts (liquidity) simply in order to keep their average return expectation at 0. This no good news in a market that is already thing even in its most active markets and non-existent even in the most basic cross markets (bitUSD/bitCNY, bitUSD/bitSilver etc.)
* * * *
The issue is even worse because BTS bulls tend to be interested in the general health and well-being of the BTS ecosystem. For that reason they are willing voters in general. The inability of the shorts to vote with their collateral leads to not voting to the full extent of their stake and or providing less liquidity to the market. A definite lose-lose situation for BTS.
[1*] 14% of available [2*] BTS are already directly held in collateral. As only 33%-50% of the total amount of exposure that any reasonably acting bull should keep in actual collateral, the amount of BTS dedicated to shorting currently is 28% to 42% of all available BTS.
[2*] Available BTS = total claimed from genesis + total BTS from the merger that are already vested as of today + newly issued BTS by dilution – fees destroyed ;
[3*] In order to prevent losing more by any 2x price decrease of BTS than 2x price increase of BTS the shorts can put less than 100% of their BTS in any short position. The max that they can put in shorting if they expect that the price can go down by more than 2x is less than 50% (and less than 33% in they include the possibility for the price to go down 4x before going up from the base (starting price). For details on the math you might find this post from arhag useful : https://bitsharestalk.org/index.php?topic=14622.msg190144#msg190144
This post got bigger than I expected and I made just a short summary of my main point…
I guess I will have to extend on this later on…stay tuned.
Can you add a "long story short , " sentence ? Sure:
Long story short - 200% collateral from shorts is a destructive force for the BTS market. The sooner we realize it and get rid of it the better. Why I believe this to be the case - you should read the long version above. At least between the short version tags!