This night I was thinking about 10% yield once again.
Why should Sally invest in bitUSD or bitGLD? Effectively, she is lending USD to the startup exchange at 10% interest. Will she get her money back? Well, that depends on whether the peg holds and bitAsset market stays liquid. For the peg to hold and stay liquid systematically, we need enough bitUSD or bitGLD longs at ANY point in time, not only when "BTSX looks overvalued". Imho we need some 10-15% of BTSX market cap to be invested in bitAssets longs so that there is little downward or illiquidity pressure on respective pegs.
So, many Sallys would ask, why should I systematically hold bitUSD if I believe that the peg will hold and stay liquid? Then I better invest in BTSX for 10000% prospective yield... Wait, at least until we have enough depth and become established, well known and trusted bank, there is a substantial risk that pegs won't always work as planned. But then Sallys need better compensation for such risk than 10% yield. Perhaps some 20-30% participation in shorts profits sounds rather fair.
I might be overlooking something, and let's say payments utility might help to increase bitUSD long holdings. But I sense that either each larger BTSX investor should be "expected" to exchange 15% of his holdings into bitAssets for the sake of their liquidity and peg stability. Or the compensation for bitAssets longs should become proportional to the risk of peg future disruption/illiquidity and opportunity cost of missing on BTSX rally. Otherwise sounds like BTSX investors looking for people who enable their prospective 10000% return for 10% yield with uncertain payback.
Note - bitAssets don't offer systematic diversification from BTSX business model risk. Yes, you can diversify short term price risk, but that doesn't create reason for critical mass of longs at all times...
So my intuition tells me that we will likely see deficit of bitAssets longs going forward... someone else concerned?