...
The main floor on the value of BitAssets is formed by the value to shorters of freeing their collateral. Forced settling by either expiration or other systems forms another floor at the value in BTS at which the longs expect to be able to force settlement. With sufficient liquidity, this secondary floor should be unnecessary, but if it is considered necessary it should be at the targeted peg value, not an offset from that.
If the longs are able to cancel settlement, that defeats the purpose of the 24 hour delay I think. In that case they might as well constantly request settlement and constantly cancel unless settlement is going to occur on a spike in their favour. If price feed volatility is an issue, they could trigger 24 hour delayed settlement at the average feed price over those 24 hours. Again, I think forced settling is less than ideal anyway. The real floor should be the value that BitAssets have to shorters who need them in order to recover their collateral.
While your main point might be correct you are just declaring how this should be rather than suggesting way to do it so!
That and I have no Idea what you mean by:
"The main floor on the value of BitAssets is formed by the value to shorters of freeing their collateral."
Clarification would be appreciated!
Let me point why I ask - The value of recovering the collateral for 'Would be shorter" is 0, so in this regard the value of the bitAsset is also 0?
To create 1 BitUSD currently at the feed, a shorter must lock up at least 2USD worth of BTS collateral, plus 1 USD worth of BTS from the buyer. To retrieve that collateral, the shorter must provide 1 BitUSD. The break even position is for the shorter to buy back 1 BitUSD for 1 USD (or 1 USD worth of something) and use it to claim all 3 USD worth of BTS. The more liquid the market, the lower the margins, and the nearer to break even you can expect to find trades happening at any given moment. This establishes the price floor: 1 BitUSD is worth 1 USD to shorters because that's what they can pay for it and break even.
Given that such a price floor exists, we can expect price of BitUSD to follow that floor with spread determined by liquidity unless a higher floor supersedes it. Currently this higher floor is created by the knowledge that shorters are required to cover at feed + 10% when shorts expire, which they've been doing with some regularity. As long as BitUSD holders expect regular expirations, we should have a peg at about $1.10 instead of $1.
Given that the lower floor should track the peg we actually want, either eliminating expirations completely or forcing them to cover at the feed rather than at feed + 10% should solve this problem.
Show Posts
