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General Discussion / Market Maker Instruction Manual?
« on: March 22, 2017, 02:09:52 pm »
Hello everyone,
I believe that it should be a regular thing for bitshares-holders to set aside a few % of their investment to become a 'market maker' on the DEX.
This is a profitable endeavor. So you will be earning a % on the fiat-value of your investment.
I don't know much about how to trade on the DEX, or how safe it is.
So I'm making this post to try and gather more accessible information that shareholders who read this forum will be able to use to benefit the bitshares network.
@JonnyBitcoin has written the most extensive information that I can find so far
http://www.investopedia.com/terms/m/marketmaker.asp
Excerpt:
How large does a BitShares Market Maker have to be in order to make a difference to the smooth-running of the bts network?
I would guess even $1-10 would be a big help to BitShares
Are there any instructions on how to do this?
How can a shareholder act as a 'market maker' on the BitShares DEX?
BitShares the network runs for the shareholders, by the shareholders. I think it follows that it is the responsibility of individual shareholders to help keep "the financial markets running efficiently" (Investopedia Quote).
How can shareholders do this?
Somebody please teach the shareholders the process, risks, rewards, and best ways to safeguard their bts-holdings.
Should they be floating 100% of their bitshares on the DEX to help 'make the market'?
Why/why not?
How much profit are market-makers likely to make?
How many $'s value do they need in initial capital to make a good profit?
How many trades are they likely to make in 1 day?
Is this high maintenance? How often do shareholders need to view their computer screen to check?
Hypothetical Scenario:
Let's say you have $10 worth of bitshares in cold storage.
You currently don't want to move these funds into a hot-wallet. It's your investment for the future and you really don't want to risk it.
Instead, you decide to purchase a new set of bitshares, for the $4 that you set aside to invest in bitshares at the end of the month. You decide you will use this $4 to become a market maker, knowing that this will help the bitshares network get established and attract new customers and investors. To help push the Price of bts: up.
You add these bts to your hot wallet and you get them onto the DEX.
You then set up trades between 2 assets, lets take bitUSD:OPEN.USDT for example. Because they both track the value of the dollar, so the relative value of each asset should remain the same. Meaning that it is less hassle, you don't have to check prices.
Firstly:
$2 are used to purchase bitUSD.
$2 are used to purchase OPEN.USDT, a bearer asset that tracks the dollar.
You then place 4 orders on the DEX.
Trade 1: You place an order to buy OPEN.USDT at a price of $0.98bitUSD per US.DT.
Successfully filling this trade would mean you now have $1.02USDT.
Trade 2: You place an order to short(sell) USDT at a price of $1.02bitUSD. If somebody
accepts this trade, you will have sold your $1.02USDT for $1.04bitUSD.
Trade 3: You place an order to buy bitUSD at a price of $0.98USDT per bitUSD.
Successfully filling this trade would mean you now have $1.02bitUSD.
Trade 4: You place an order to short (sell) bitUSD at a price of $1.02USDT per bitUSD.
IS THIS CORRECT?
I believe that it should be a regular thing for bitshares-holders to set aside a few % of their investment to become a 'market maker' on the DEX.
This is a profitable endeavor. So you will be earning a % on the fiat-value of your investment.
I don't know much about how to trade on the DEX, or how safe it is.
So I'm making this post to try and gather more accessible information that shareholders who read this forum will be able to use to benefit the bitshares network.
@JonnyBitcoin has written the most extensive information that I can find so far
http://www.investopedia.com/terms/m/marketmaker.asp
Excerpt:
Quote
What is a 'Market Maker'
A market maker is a broker-dealer firm that assumes the risk of holding a certain number of shares of a particular security in order to facilitate the trading of that security. Each market maker competes for customer order flow by displaying buy and sell quotations for a guaranteed number of shares, and once an order is received from a buyer, the market maker immediately sells from its own inventory or seeks an offsetting order. The Nasdaq is the prime example of an operation of market makers, given that there are more than 500 member firms that act as Nasdaq market makers, keeping the financial markets running efficiently.
Read more: Market Maker Definition | Investopedia http://www.investopedia.com/terms/m/marketmaker.asp#ixzz4c3jvFhmo
Follow us: Investopedia on Facebook
How large does a BitShares Market Maker have to be in order to make a difference to the smooth-running of the bts network?
I would guess even $1-10 would be a big help to BitShares
Are there any instructions on how to do this?
How can a shareholder act as a 'market maker' on the BitShares DEX?
BitShares the network runs for the shareholders, by the shareholders. I think it follows that it is the responsibility of individual shareholders to help keep "the financial markets running efficiently" (Investopedia Quote).
How can shareholders do this?
Somebody please teach the shareholders the process, risks, rewards, and best ways to safeguard their bts-holdings.
Should they be floating 100% of their bitshares on the DEX to help 'make the market'?
Why/why not?
How much profit are market-makers likely to make?
How many $'s value do they need in initial capital to make a good profit?
How many trades are they likely to make in 1 day?
Is this high maintenance? How often do shareholders need to view their computer screen to check?
Hypothetical Scenario:
Let's say you have $10 worth of bitshares in cold storage.
You currently don't want to move these funds into a hot-wallet. It's your investment for the future and you really don't want to risk it.
Instead, you decide to purchase a new set of bitshares, for the $4 that you set aside to invest in bitshares at the end of the month. You decide you will use this $4 to become a market maker, knowing that this will help the bitshares network get established and attract new customers and investors. To help push the Price of bts: up.
You add these bts to your hot wallet and you get them onto the DEX.
You then set up trades between 2 assets, lets take bitUSD:OPEN.USDT for example. Because they both track the value of the dollar, so the relative value of each asset should remain the same. Meaning that it is less hassle, you don't have to check prices.
Firstly:
$2 are used to purchase bitUSD.
$2 are used to purchase OPEN.USDT, a bearer asset that tracks the dollar.
You then place 4 orders on the DEX.
Trade 1: You place an order to buy OPEN.USDT at a price of $0.98bitUSD per US.DT.
Successfully filling this trade would mean you now have $1.02USDT.
Trade 2: You place an order to short(sell) USDT at a price of $1.02bitUSD. If somebody
accepts this trade, you will have sold your $1.02USDT for $1.04bitUSD.
Trade 3: You place an order to buy bitUSD at a price of $0.98USDT per bitUSD.
Successfully filling this trade would mean you now have $1.02bitUSD.
Trade 4: You place an order to short (sell) bitUSD at a price of $1.02USDT per bitUSD.
IS THIS CORRECT?
Bitshares is superior to other exchanges because it uses BitUSD which has no human liability and is decentralised.
But this advantage means little if our BitUSD is not available to buy in quantity near the peg.
A liquid asset is cash on hand or an asset that can be readily converted to cash. An asset that can readily be converted into cash is similar to cash itself because the asset can be sold with little impact on its value.
We need to make BitUSD a liquid asset. But how?
3.) BitUSD:OPEN.USDT market
The best way to show people BitUSD is worth 1 USD is to create a market where BitUSD trades against a bearer asset that is worth 1 USD. That would be USDT (see www.tether.to)
Bearer asset = Doesn't need to be kept in a named account.
I am trying to kick start the BitUSD:OPEN.USDT market with $1000 buy and sell walls and a 6% spread. Please take advantage of them or add some orders yourself. This market pair is easy for anyone to be a market maker in because both assets have the same face value meaning you don't have to trust bot software because orders don't need updating
