China buys large amounts of USD to keep the yuan undervalued relative to the dollar to prop up their manufacturing and export sectors. Without this intervention the yuan would be closer to parity with the USD. The situation with BitUSD/USD isn't quite the same.
The BitUSD market is set up such that the natural valuation tends toward parity with the US dollar if any of the following are true:
- BTSX has a stable valuation that the market believes will remain stable for the near future. This allow liquidity into BitUSD as a stable store of value.
- BitUSD markets are deep enough to absorb expected BTSX shocks. (This is really just a different way of looking at 1.)
- Exogenous demand for BitUSD is high. This, of course, will directly drive liquidity into BitUSD markets.
Currently none of these are true.
1 does not hold because the market is split on the future of BTSX. Bulls think it is severely undervalued and so have no interest in BitUSD. Bears think BitAssets cannot work and, thus, BTSX is primed for complete collapse.
2 does not hold because the market is incredibly immature and shallow.
3 does not hold because BitUSD is, currently, mostly useless.
With a larger community (or, perhaps, even just time as bulls and bears revert their BTSX expectations to the mean) the ambivalence of the market could be mitigated enough that 1 could become true. Same for 2.
3 could become true as services and other uses for BitUSD come online. For example, shops that accept BitUSD (unlikely to happen first) or interest bearing BitUSD.
Show Posts
