Eventually, sometime in the future, when BitShares X is saturated (meaning there aren't any new people with wealth left to convince to adopt this system), BTSX growth should settle down and thus BitAsset interest rates will be forced to go down. I think some non-zero interest rate should still be possible then because the DAC is still able to earn revenue from transaction fees and market fees from operating the decentralized exchange.

first, arhag - thanks for your elaborate answer! this makes sense as long as BTSX can grow at decent rates.

"at saturation", the question becomes how much annual profit can BitsharesX potentially generate without getting involved into credit business. E.g. if annual profits can be at USD 2bn from operating a worldwide decentralised exchange, then perhaps market cap of USD 20bn sounds reasonable, with some non-negative interest still being paid on bitAssets. What I am pointing out, is that it would be difficult even in theory to get an order of magnitude bigger than that, unless BitsharesX gets somehow involved into extending credit - perhaps a decentralised lending union DAC... banking business has been primarily about credit throughout the civilised history, so it might be worth a thought. perhaps too early though, or BM already has answers

I read a lot in here about the market peg for bit asset...

I know what the concept means, but except for pre-defined market consensus, I don't see how it can peg to the USD value. Is market consensus a sufficient force to keep the peg?

My understanding of shorting is selling something you don't have (and borrow) for a fixed price in the future, betting the price will drop so you'll be able to buy it cheaper later and make a profit. (Am I right?) But how does shorting could get the value of bitusd to drop compared to usd and affect the peg?

Shorting is indeed selling some asset you borrowed, however not for a fixed price in the future (this would be forward trade), but at the currently prevailing (spot) market price. In the future, the short seller "covers" his short position by buying the asset at then prevailing (spot) market price, and returns the asset to the lender.

with regards to the peg, as far as I understand - there is a mechanism in place within bitsharesX which enables willing market participants (arbitrageurs) to make profits whenever bitUSD moves far away from the USD value, expressed in BTSX terms. I might be still missing some important reasoning behind the peg, e.g. prediction markets stuff. Are there implicit or explicit penalties in place for both shorts and longs, in case bitUSD were to stabilize around 0.5 USD? or 1.5 USD?

Yet
- whenever bitUSD is reasonably undervalued vs. USD (which recently meant somewhere below 0.75), such arbitrageurs establish their longs in bitUSD (buying bitUSD with BTSX), thus moving its price higher somewhat closer to the peg, adjusted for BTSX/USD rate moves. To neutralise the risk that BTSX price increases in USD terms while peg readjusting, they would simultaneously buy corresponding BTSX amoung for USD on some centralised exchange. Finally, positions are unwound, when achieving profit after peg readjusted: sell bitUSD for BTSX, and sell BTSX for USD.

- whenever bitUSD becomes expensive vs. USD (which currently means somewhere above 0.95), then arbitrageurs can go short bitUSD by "borrowing bitUSD from bitsharesX", e.g. issuing for that very purpose newly created bitUSD into the hands of the willing buyers. Short sellers have to collateralise their positions by certain amount of their BTSX - which ensures that they don't simply run away if their short position loses value. The act of satisfying bitUSD demand with newly issued bitUSD contributes to bitUSD price downward pressure vs. BTSX, again moving bitUSD closer to USD peg. Still, to neutralise the risk of BTSX falling in USD terms while peg readjusting, such short sellers would exchange correspondent amount of their BTSX holdings into USD on some centralised exchange for the duration of their trade. Finally, positions get unwound, either when achieving profit after peg readjusted, or via "margin call": bitUSD short gets covered with BTSX collateral released, and buy back BTSX for USD on the centralised exchange. At short covering, bitUSDs previously created by bitsharesX for the shorting purpose, get simultaneously destroyed (e.g. borrowed asset is returned to the issuer).

Note: arbitrageur shorting bitUSD, who is also BTSX bull, risks missing BTSX rally while performing arbitrage. Therefore BTSX bulls should simply short sell overvalued vs peg bitUSD, thus contributing to the peg, while carrying the risk of BTSX fall vs USD.

Implementing all this sounds difficult, but arbitrage will be automatised as the market matures and so becomes more efficient.

Quote from: kisa0145 on September 02, 2014, 03:39:26 pm

Quote from: maqifrnswa on September 02, 2014, 02:46:07 pm

FUNNY THOUGHT: Just popped in my head, so silly I never saw this... BTSX will either succeed like crazy or go out in a bang. If it goes out like a bang, no matter how many BTSX I have, I get 0. If it takes off like crazy, I get money proportional to my holdings. In this game, I should leverage EVERYTHING I have as much as possible to get as many BTSX on margin as possible. If it goes up, i make a lot more than if I didn't leverage. If it goes down, I loss the exact same as if I did not leverage. The optimal move is to leverage and max out no matter what the BTSX-USD exchange rate.

who would give you a loan for buying BTSX "on margin"? unless the creditor believes nearly 100% in BTSX, in which case they are better off investing themselves margin trading is usually available as long as margin not exceeded, e.g. for comparatively low volatility assets...

that's exactly my point: very few people will let you buy on margin, that's why bitUSD was trading so low (you had to pay a premium). And people didn't care they were paying a premium since if BTSX collapsed, they would get nothing either way.

agree this strategy would make sense in a binary one-period scenario. however, the reality is probably far from one-period binary. e.g. people pursuing that strategy would risk losing some bitshares, if BTSX went down somewhat to trigger margin calls, and then recovered. hasn't that happened already?

Possibly remittances could be an attractive segment to approach!

The main challenge here would be brokers (trusted persons network) in target countries, who can be contacted by recepients locally via Email or phone for exchanging bitUSD -> cash USD for some reasonable fee...

Quote from: kisa0145 on September 02, 2014, 12:29:44 pm

normal yes, but i thought crazy buying hype was some 10 days ago, and crazy profit taking was some 5 days ago... so i expected the daily volume to stabilize around 200K since the price was hovering at current levels for a few days now.... But the volume kept high, so I was wondering about the timing for this reduction. whatever. one can probably artificially increase the volume shown just by churning BTSX holdings on some exchanges via a bot, no?

It was also extended weekend - holiday in the US.

 

Ya, you can sell coins to yourself but you'd get killed by transaction fees doing it for very long.

Trading usually costs fee .. unless you have too much money trade back and forth like crazy doesn't make too much sense

agreed

Quote from: kisa0145 on September 02, 2014, 12:14:15 pm

guys any thoughts why BTSX had stable $1.5m+ daily volume over the last week, falling now so rapidly to below 0.5m?
- was there any attempt to keep the volume artificially high last week? or is it rather temporary drop now?

We don't want just a weather forecast! We want to know HOW it works and WHY it rained yesterday but not today!

ok then let me correct myself in asking - any clues on specific causes for the volume dropping so rapidly today?

In all the readings about market pegs I read, Sally wanted to hedge her position in bitUSD.   We never found Sally.
So who wants bitUSD? Who are they?  What problem does bitUSD solve?

what's the spelling of "Sally" in Chinese, Russian, or Argentine - maybe there she lives?