Why are market-makers reluctant to make a tighter market?

[luckybit]

I think because we are in the early stages we put perhaps too much emphasis on BitUSD "adoption" when we should put more emphasis on using BitUSD ourselves. In order to do that we need ways to set up smart contracts or other means so that we can easily pay developers in BitUSD.

I think the future for BitUSD is bright but we have to use it before merchants will care about it. Bitcoin is slow to focus on payroll and paying wages because Bitcoin isn't good for that. BitUSD doesn't have to be slow at that because it's perfect for that.

So instead of focusing on where we can spend BitUSD we should focus on allowing people to earn it through DACs somehow so that more of us have some through earnings. It doesn't make a lot of sense why people would take regular USD out of their bank and buy BitUSD but it does make sense that people would work for BitUSD and then start using it.

I'm I am new to this space, never heard of Bitcoin before and I ask: "How can I earn some BitUSD?" what would I be told?

Good ideas here, but there is an overriding Universal Economic Truth that should be mentioned and you have created a "teachable moment" for us all:

Money is fungible.  If you want a certain kind of money, you should earn whatever kind of money you can earn most efficiently and then buy the kind of money you want to hold with it.

This is the idea behind the trend of "mining the most profitable asset, selling it, and using the proceeds to buy the most promising asset."

So, we shouldn't create low-value make-work tasks for earning bitUSD.  If the most profitable use of your time is shining shoes for Zimbabwe dollars, well, shine shoes for Zimbabwe dollars!  Then quickly sell and buy bitUSD, bitGLD, bitBTC or BTSX. 

How do we help people most efficiently earn BitUSD then? It's like analog to digital conversion or copying tape to tape in a studio where with each copy the signal quality reduces. The act of actually earning BitUSD is what conditions people to value BitUSD as they do USD. The same conditioning process would work for any of the other currencies supported by Bitshares X.

In my opinion if we want BitUSD to be used by everyone then instead of telling people to use Zimbabwe dollars before converting into BitUSD we should let them earn BitUSD or BitZWD directly. How else do you promote a currency if hardly anyone works for it directly?

Bitcoin is suffering from the same problem. Everyone says to buy Bitcoin but Bitcoin is volatile. If people said to work for Bitcoin then people wouldn't care as much about speculating with it. Bitcoin is volatile so people cannot save in it but with Bitshares X you can save your BitUSD as BitGLD.

So the idea is you want to get people to work to earn BitUSD (no matter if it's high or low value it's still activity which has some value), then store their savings in BitGLD. Mining for Bitshares could actually work to a certain extent for the mining community but if you want to bring the whole world into it then you have to market to the whole world.

If someone isn't from the USA then maybe they don't want BitUSD. Maybe they want to work and earn in their own currency. In order to market their own currency to them we need testimonials where people around the world are working and earning BitCNY, BitJPY, or whatever their local currency is.

This way if someone from here wants to start a business which is or is not a DAC then we can pay our employees in their local currency of choice easily. It doesn't really matter what the business is or how much money the business makes, it only matters that workers are exposed to and become accustomed to earning digital currency.

I hope we can avoid making the same mistakes Bitcoin made and actually encourage adoption by the working class (not just merchant class).  I think one problem I've identified with the current marketing is that it doesn't seem international in scope and the best way to make it international in scope is to translate into as many languages as possible while also launching all the different currencies so that people in these countries can pay their employees in BitAssets. I understand it's really early on in the development of this new industry but I think it should at least be a priority for each of us to try to reach a point in our lives where we earn all of our money in crypto-currency (BitUSD preferably) so that we can market the product by using it which is something the Bitcoin community isn't doing.

[bytemaster]

It all has to do with holding period on bit usd.  If I buy bit usd today and must wait 1 day to sell and btsx goes up 1% then I lose.   Likewise if I buy btsx and hold for a day I lose.   So spread is proportional to holding period and volatility. 

To have a tight peg we need usd to bitusd makers.

Exactly - market-making isn't the risk-free proposition people seem to think it is. To make the market, I have to have a stash of BitUSD, and accept all the risks associated with that - mainly the risk that BTSX shoots up, which most people here believe will happen.

I started a whole new post on this comparing things to NuBits and user issued USD IOUs.   

It boils down to this, to perform "risk free market making" you must be the sole issuer and sell for the asset you wish to peg to while being willing to hold the asset you are pegging.

Also being a market maker means you are not earning interest on the USD you hold in bids... yet you will be paying interest on the USD you short. 

I think we need to re-evaluate what it means to peg two assets... the spread between USD and BitUSD doesn't mean the peg is broken any more than the spread between Bitstamp USD and Bter USD relative to BTC is broken.   

The key is that they move in the same direction at about the same time.   If BTSX were to fall by 25%... BitUSD would maintain its purchasing power that it has today... but still have the spread.  Likewise if BTSX were to rise by 25% BitUSD would be unchanged. 

Once you understand this and set the expectations properly then people can start using BitUSD for what it is... a new tool, a new asset. 

[Stan]

I think because we are in the early stages we put perhaps too much emphasis on BitUSD "adoption" when we should put more emphasis on using BitUSD ourselves. In order to do that we need ways to set up smart contracts or other means so that we can easily pay developers in BitUSD.

I think the future for BitUSD is bright but we have to use it before merchants will care about it. Bitcoin is slow to focus on payroll and paying wages because Bitcoin isn't good for that. BitUSD doesn't have to be slow at that because it's perfect for that.

So instead of focusing on where we can spend BitUSD we should focus on allowing people to earn it through DACs somehow so that more of us have some through earnings. It doesn't make a lot of sense why people would take regular USD out of their bank and buy BitUSD but it does make sense that people would work for BitUSD and then start using it.

I'm I am new to this space, never heard of Bitcoin before and I ask: "How can I earn some BitUSD?" what would I be told?

Good ideas here, but there is an overriding Universal Economic Truth that should be mentioned and you have created a "teachable moment" for us all:

Money is fungible.  If you want a certain kind of money, you should earn whatever kind of money you can earn most efficiently and then buy the kind of money you want to hold with it.

This is the idea behind the trend of "mining the most profitable asset, selling it, and using the proceeds to buy the most promising asset."

So, we shouldn't create low-value make-work tasks for earning bitUSD.  If the most profitable use of your time is shining shoes for Zimbabwe dollars, well, shine shoes for Zimbabwe dollars!  Then quickly sell and buy bitUSD, bitGLD, bitBTC or BTSX. 

[Rune]

I'd be willing to contribute 20k bitUSD to a nubits style peg enforcement. IMO he best would actually be to have an extremely deep bitcoin to bitUSD market, rather than usd to bitUSD. I imagine that large volume usd to bitUSD will not happen on an exchange, but only once a more convenient on-ramp has been created.

Btw, the automatic short cover really should be implemented at 30 days for everyone instantly, perhaps with up to an extra 30 day randomly chosen offset to there isn't a huge btsx dump in a single day. I know it's unfair for the shorters who didn't expect it, but they are also btsx holders and must agree that for btsx to begin taking off we must have a deep bitUSD peg ASAP.

[biophil]

It all has to do with holding period on bit usd.  If I buy bit usd today and must wait 1 day to sell and btsx goes up 1% then I lose.   Likewise if I buy btsx and hold for a day I lose.   So spread is proportional to holding period and volatility. 

To have a tight peg we need usd to bitusd makers.

Exactly - market-making isn't the risk-free proposition people seem to think it is. To make the market, I have to have a stash of BitUSD, and accept all the risks associated with that - mainly the risk that BTSX shoots up, which most people here believe will happen.

[bytemaster]

We have several such exchanges opening up.

[clout]

It all has to do with holding period on bit usd.  If I buy bit usd today and must wait 1 day to sell and btsx goes up 1% then I lose.   Likewise if I buy btsx and hold for a day I lose.   So spread is proportional to holding period and volatility. 

To have a tight peg we need usd to bitusd makers.

How do we get that operation up and running?

[luckybit]

I don't think they are reluctant, I think it has to do with the fact that there is low demand for bitUSD right now. It's easy to get in but not so easy to get out. I think the only solution is to create demand for bitUSD through merchant adoption. The best mm bots can do right now is create artificial volume.

Merchant adoption isn't how you create demand. The way to create demand is through payroll. People need to get paid in BitUSD.

If we are going to hire DAC developers they will want to get paid in BitUSD so that alone should be enough to create demand.

It all has to do with holding period on bit usd.  If I buy bit usd today and must wait 1 day to sell and btsx goes up 1% then I lose.   Likewise if I buy btsx and hold for a day I lose.   So spread is proportional to holding period and volatility. 

To have a tight peg we need usd to bitusd makers.

I think because we are in the early stages we put perhaps too much emphasis on BitUSD "adoption" when we should put more emphasis on using BitUSD ourselves. In order to do that we need ways to set up smart contracts or other means so that we can easily pay developers in BitUSD.

I think the future for BitUSD is bright but we have to use it before merchants will care about it. Bitcoin is slow to focus on payroll and paying wages because Bitcoin isn't good for that. BitUSD doesn't have to be slow at that because it's perfect for that.

So instead of focusing on where we can spend BitUSD we should focus on allowing people to earn it through DACs somehow so that more of us have some through earnings. It doesn't make a lot of sense why people would take regular USD out of their bank and buy BitUSD but it does make sense that people would work for BitUSD and then start using it.

I'm I am new to this space, never heard of Bitcoin before and I ask: "How can I earn some BitUSD?" what would I be told?

[bytemaster]

It all has to do with holding period on bit usd.  If I buy bit usd today and must wait 1 day to sell and btsx goes up 1% then I lose.   Likewise if I buy btsx and hold for a day I lose.   So spread is proportional to holding period and volatility. 

To have a tight peg we need usd to bitusd makers.

[merockstar]

Is there still going to be a market maker profit button?

[clout]

I think the new market engine will greatly increase the demand of bitUSD through the yield while also  adding to the market liquidity through the more frequent covering of short positions. What is the time frame for the new market engine launch?

[starspirit]

"There isn't enough demand for bitUSD" as an explanation for insufficient liquidity would be a signal that the peg was already broken!

You should think of it like, "are the shorts going to gamble even harder before they lock in their current losses?". Now with 30-day rotation on shorts it will be easy to see where the demand at anywhere below $1 comes from.

I think not enough people are comfortable using the existing market-maker bots, probably for good reason. But anyone who buys bitUSD undervalued and keeps a sell wall at the price feed will make the spread * volume every month. As soon as people realize they can compete for this "free" money the spread should narrow significantly.

As I understand it most of the shorts are grandfathered and currently not subject to the 30 day covering, is that right? So it appears we are not in that position for some time. If these were all rolled off, then the market would tighten considerably for the reason you state. At that point would there be anything in the way of market-makers keeping a tight and liquid market?

[toast]

"There isn't enough demand for bitUSD" as an explanation for insufficient liquidity would be a signal that the peg was already broken!

You should think of it like, "are the shorts going to gamble even harder before they lock in their current losses?". Now with 30-day rotation on shorts it will be easy to see where the demand at anywhere below $1 comes from.

I think not enough people are comfortable using the existing market-maker bots, probably for good reason. But anyone who buys bitUSD undervalued and keeps a sell wall at the price feed will make the spread * volume every month. As soon as people realize they can compete for this "free" money the spread should narrow significantly.

[Mysto]

I don't think they are reluctant, I think it has to do with the fact that there is low demand for bitUSD right now. It's easy to get in but not so easy to get out. I think the only solution is to create demand for bitUSD through merchant adoption. The best mm bots can do right now is create artificial volume.

Is it a catch-22 though? Low demand because there is low liquidity?

No, I think there is low liquidity because of low demand. I don't think adding more liquidity will increase demand very much. The only way I think bitUSD demand will go up is if you can use it to buy goods and services.

So far the only real users are those that are really bullish on BTSX so they are reluctant to go long bitUSD. The speculative appreciation of BTSX is far greater than the expected yield on bitUSD.

When BTSX has its first big spike to $0.10 or $0.50 I think we'll see a lot of people selling some BTSX to take some profits and hedge a bubble.

Yes but that will be temporary.

Well, I'm reluctant because if I decided to play market maker and added a bunch of buy-side liquidity, I'd end up with a great big pile of bitUSD and nobody to sell it to. The fact that nobody is buying bitUSD near the peg is evidence that there isn't much money to be made playing market-maker.

Sent from my SCH-S720C using Tapatalk 2

Yea I guess that would make one reluctant.

[biophil]

I don't think they are reluctant, I think it has to do with the fact that there is low demand for bitUSD right now. It's easy to get in but not so easy to get out. I think the only solution is to create demand for bitUSD through merchant adoption. The best mm bots can do right now is create artificial volume.

Well, I'm reluctant because if I decided to play market maker and added a bunch of buy-side liquidity, I'd end up with a great big pile of bitUSD and nobody to sell it to. The fact that nobody is buying bitUSD near the peg is evidence that there isn't much money to be made playing market-maker.

Sent from my SCH-S720C using Tapatalk 2