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General Discussion / BitUSD30+
« on: September 13, 2014, 09:51:41 pm »
I refer to the discussion on https://soundcloud.com/beyond-bitcoin-hangouts around minute 30. BM said it would make sense to have BitUSD20 (bitUSD with 20% interest p.a.) or another BitUSD asset with more interest. The conclusion was drawn that by finding an interest rate at which bitUSD longs and shorts are balanced would be an adequate way of the market finding the price of a bitAsset.
I would say though that the consequence of this is that the price of BitUSD is directly correlated to the value of BTSX this way and not to the value of the USD. For example if it turns out that supply and demand for BitUSD50 is balanced then this means that (given that I am solely in for speculation purposes and given that I am ok to give up some BTSX liquidity for the medium term (long enough to sit out some unpredictable short term price falls)) the market expects that BTSX will go up in price 50% per year. If I expected BTSX to go up by more than 50% per year I would just stay in BTSX, if I think BTSX will go up less than 50% p.a. I would want to go all in BitUSD50.
Where am I thinking this wrong?
notice: I refer to the fixed interest concept, not the currently varying yield based on market fees.
I would say though that the consequence of this is that the price of BitUSD is directly correlated to the value of BTSX this way and not to the value of the USD. For example if it turns out that supply and demand for BitUSD50 is balanced then this means that (given that I am solely in for speculation purposes and given that I am ok to give up some BTSX liquidity for the medium term (long enough to sit out some unpredictable short term price falls)) the market expects that BTSX will go up in price 50% per year. If I expected BTSX to go up by more than 50% per year I would just stay in BTSX, if I think BTSX will go up less than 50% p.a. I would want to go all in BitUSD50.
Where am I thinking this wrong?
notice: I refer to the fixed interest concept, not the currently varying yield based on market fees.