BitShares Forum
Main => General Discussion => Topic started by: MarkoPaasila on December 31, 2015, 10:26:33 am
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- Borrowing EUR is the right / only way to create EUR, is it?
- Suppose I borrow EUR. If I provide liquidity, I must place a sell order for less than I just "payed"? At least looking at the chart it seems so to me.
- If I sell the EUR I just borrowed into existence, it is still backed by my previous collateral, and I still have the risk of a margin call?
- If BTS goes down, I risk getting margin called because of holding EUR, in which case I pay a price for taking a risk?
- If BTS goes up, I miss the train because of providing liquidity?
So what's my incentive? How can I provide liquidity while minimizing my risk? Even better, can I make profit by providing liquidity?
I'm a small guy with only 200€ to play with, but it might be better than nothing. Maybe some bigger guys could help out too if they understood better, so please help me understand in layman terms.
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1. Yes
2. You borrow at the settlement price (price feed) . and people can always settle there EUR at the settlement price. That's why market price is a little off from the price feed (as is desired)
I would recommend to read the whitepaper http://docs.bitshares.eu/bitshares/papers/index.html
3. Yes. If you sell your borrows EUR, you essentially go SHORT
4. you get margin called because you BORROWED EUR not because you have EUR. No one being long on EUR will ever be called
5. if you sell your borrowed EUR and BTS price goes up, you can buy back EUR and close your borrow position for cheaper thus making a profit.
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Thanks! So in short; If I believe BTS will go up, I have an incentive to provide liquidity. Otherwise not?
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Thanks! So in short; If I believe BTS will go up, I have an incentive to provide liquidity. Otherwise not?
There are only 4 shareholders providing EUR liquidity today http://cryptofresh.com/a/EUR (http://cryptofresh.com/a/EUR).
The more the merrier! Every little helps! Do your bit for BitShares! ...
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by borrowing say 100 USD you are neutral and simply owe the network 100 USD, which you now have and can return at anytime.
You have 100 USD
You owe 100 USD
you are net neutral. long USD short USD
if you then sell the 100 USD in exchange for BTS :
you have BTS (100 USD worth)
you owe 100 USD
So you are long BTS short USD
if instead you sell the 100 USD in exchange for BTC:
you have BTC (100 USD worth)
you owe 100 USD
so you are long BTC short USD
in any case you can be margin called if the value of the BTS backing the 100 USD borrowed falls below the margin requirements. So you will be looking to ensure that whatever you are long maintains a USD value to either pay off what you borrowed or purchase enough BTS to further secure the borrowed USD.
For example if you used the 100 USD to buy BTC at $300 and BTC then went to $1000 while at the same time BTS went from $.004 to .0015 . Depending on your collateralization you may be at risk of being margin called on the USD you borrowed. So you could either sell $100 worth of BTC to pay off the borrow or sell some BTC for BTS to top up your collateral.
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4. you get margin called because you BORROWED EUR not because you have EUR. No one being long on EUR will ever be called
Clarification: if you are both long and short in EUR your short position CAN be margin called.
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Please focus on bts/cny market. The supply of those wanting to leverage bts is too small to bootstrap all markets at once.
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The dex is struggling to get going and I think we need to create maybe $50,000 BITUSD and 100 BITBTC using reserve funds as collateral and sell it in to the market at feed price +5% with the proceeds of the sale going back into the reserve funds.
Although I would like to create bitBTC into existence myself I'm not currently confident I'll be able to buy back the bitBTC at a reasonable price in the future to close my collateral position. I've bought 5 BITBTC at a huge premium (+30%) and I'm unlikely to sell anytime soon. Meaning those who wish to exit their collateral positions will be unable to as I'm not selling and I hold 10% of total supply.
Smartcoin creators need to be bolstered by a supply of smartcoin liquidity and this should come from the reserve pool.
does anyone know if the reserve pool has an actual account?
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Btw, one very low risk way of providing liquidity is CCEDK's bitEUR/EUR market (https://www.ccedk.com/biteur-eur). Not much have been happening there lately but if you put buy and sell orders maybe other people will get interested too.