Project: BitUSD Liquidity

[starspirit]

This is great stuff.

Would combining this with BitBTC shorted with BitUSD as collateral (shorting BitAssets with other BitAssets is still a future feature I presume?) help? That way you can short as much BitBTC as BTC you have on the exchange for your market maker bot and so the net effect is that you are not exposed to the price volatility of BTC (with the cost that you have only 1/4 of the total value you put up for market making for each side of the BitUSD/BTC exchange).

Since many of us are BTS bulls and are already exposed to BTS anyway, we can get close to this with the current client by simply shorting BitBTC with BTS. You can have X dollars worth of BTS converted into BitUSD, X dollars worth of BTS converted into BTC (at a price of P1 USD/BTC), and 2X dollars worth of BTS put up as collateral to short X dollars worth of BitBTC. So your 4X dollars worth of BTS gives you -X/P1 BitBTC, +X BitUSD, and +X/P1 BTC. If the price of BTC falls to P2 < P1, you take the X/P1 BTC (now worth X*P2/P1 USD), convert it to X/P1 BitBTC and cover the short to get 3X dollars worth of BTS (assuming the price of BTS has not changed). Then you reshort at the new P2 price with 2X dollars worth of BTS to short sell X/P2 BitBTC. You take the other X dollars worth of BTS and trade it for X dollars worth of BTC at this new P2 price (so for X/P2 BTC). Now you can put back the buy wall for X/P2 BTC which still maintains the value of X dollars worth of BTC. If the price of BTC increased instead you can see how a similar process would allow you to maintain X dollars worth of BTC in the buy wall after covering and reshort.

The problem with the above is that it assumes the price of BTS remains fixed relative to USD. This is why shorting with BitUSD as collateral would be better. But with this limitation it just means the price of the buy and sell walls in terms of USD would have to grow and shrink as the price of BTS goes up and down respectively. But if we are betting on eventually breaking away from BTC and all the other altcoins and growing the price of BTS relative to BTC and USD, this is a sensible strategy for our market making bots, isn't it? It allows the market making bots to maintain symmetric height (in dollar value) walls which do not depend on fluctuations in BTC price but do grow taller as the price of BTS grows relative to the dollar. Also keep in mind I am not including the effect of short interests here.

Depending on how often the BTC hedge needs to be adjusted, there will be a spread cost of transacting in bitBTC that needs to be factored in. If this still is cost-effective, another alternative for absolute return traders that want to hedge out both BTC and BTS risk is to short 1 bitBTC with BTS (increasing BTS exposure) and also buy 1 bitUSD with BTS (offsetting the increase in BTS exposure). Although the trader still needs an inventory of BTS to begin with, the exposure to BTS does not need to be increased in order to implement the bitUSD market making.

[fluxer555]

Just sent a request to CMC about adding that market pair in. I suggest everyone who sees this do this as well!

https://docs.google.com/forms/d/1IZf5cBivam_93zENT_arFFuvWDidHGjWxoTMVmFSoWg/viewform

Please add the BitUSD/BTC pair to the Markets of BitUSD:

http://coinmarketcap.com/assets/bitusd/#markets

https://bter.com/trade/btc_bitusd

There has been $20k in volume in the past 24 hours, and this was not counted. Thank you!

[Empirical1.1]

Pity coinmarketcap doesn't seem to capture that BitUSD/BTC volume on bter which was $20 000+ these last 24hrs.

[arhag]

@arhag

And if you want to remain 100% long BTS (and have 1/3 (1/6 for each side) of your funds for your trading-bot operations) short the bitUSD as well.

i.e.
2x to short bitUSD, 2x to short bitBTC, 1x to buy bitUSD, 1x to buy BTC...

Yup! That's also a great option for the real BTS superbulls who don't want to give up any exposure to BTS price gains while still running market making bots.

[Rune]

This is great stuff.

Would combining this with BitBTC shorted with BitUSD as collateral (shorting BitAssets with other BitAssets is still a future feature I presume?) help? That way you can short as much BitBTC as BTC you have on the exchange for your market maker bot and so the net effect is that you are not exposed to the price volatility of BTC (with the cost that you have only 1/4 of the total value you put up for market making for each side of the BitUSD/BTC exchange).

Since many of us are BTS bulls and are already exposed to BTS anyway, we can get close to this with the current client by simply shorting BitBTC with BTS. You can have X dollars worth of BTS converted into BitUSD, X dollars worth of BTS converted into BTC (at a price of P1 USD/BTC), and 2X dollars worth of BTS put up as collateral to short X dollars worth of BitBTC. So your 4X dollars worth of BTS gives you -X/P1 BitBTC, +X BitUSD, and +X/P1 BTC. If the price of BTC falls to P2 < P1, you take the X/P1 BTC (now worth X*P2/P1 USD), convert it to X/P1 BitBTC and cover the short to get 3X dollars worth of BTS (assuming the price of BTS has not changed). Then you reshort at the new P2 price with 2X dollars worth of BTS to short sell X/P2 BitBTC. You take the other X dollars worth of BTS and trade it for X dollars worth of BTC at this new P2 price (so for X/P2 BTC). Now you can put back the buy wall for X/P2 BTC which still maintains the value of X dollars worth of BTC. If the price of BTC increased instead you can see how a similar process would allow you to maintain X dollars worth of BTC in the buy wall after covering and reshort.

The problem with the above is that it assumes the price of BTS remains fixed relative to USD. This is why shorting with BitUSD as collateral would be better. But with this limitation it just means the price of the buy and sell walls in terms of USD would have to grow and shrink as the price of BTS goes up and down respectively. But if we are betting on eventually breaking away from BTC and all the other altcoins and growing the price of BTS relative to BTC and USD, this is a sensible strategy for our market making bots, isn't it? It allows the market making bots to maintain symmetric height (in dollar value) walls which do not depend on fluctuations in BTC price but do grow taller as the price of BTS grows relative to the dollar. Also keep in mind I am not including the effect of short interests here.

This is a really great idea, however I think at first it's better to use centralized services for this. When the DEX becomes more mature we can use that instead, it'll make the entire thing even better!

[zerosum]

@arhag

And if you want to remain 100% long BTS (and have 1/3 (1/6 for each side) of your funds for your trading-bot operations) short the bitUSD as well.

i.e.
2x to short bitUSD, 2x to short bitBTC, 1x to buy bitUSD, 1x to buy BTC...

[arhag]

This is great stuff.

Would combining this with BitBTC shorted with BitUSD as collateral (shorting BitAssets with other BitAssets is still a future feature I presume?) help? That way you can short as much BitBTC as BTC you have on the exchange for your market maker bot and so the net effect is that you are not exposed to the price volatility of BTC (with the cost that you have only 1/4 of the total value you put up for market making for each side of the BitUSD/BTC exchange).

Since many of us are BTS bulls and are already exposed to BTS anyway, we can get close to this with the current client by simply shorting BitBTC with BTS. You can have X dollars worth of BTS converted into BitUSD, X dollars worth of BTS converted into BTC (at a price of P1 USD/BTC), and 2X dollars worth of BTS put up as collateral to short X dollars worth of BitBTC. So your 4X dollars worth of BTS gives you -X/P1 BitBTC, +X BitUSD, and +X/P1 BTC. If the price of BTC falls to P2 < P1, you take the X/P1 BTC (now worth X*P2/P1 USD), convert it to X/P1 BitBTC and cover the short to get 3X dollars worth of BTS (assuming the price of BTS has not changed). Then you reshort at the new P2 price with 2X dollars worth of BTS to short sell X/P2 BitBTC. You take the other X dollars worth of BTS and trade it for X dollars worth of BTC at this new P2 price (so for X/P2 BTC). Now you can put back the buy wall for X/P2 BTC which still maintains the value of X dollars worth of BTC. If the price of BTC increased instead you can see how a similar process would allow you to maintain X dollars worth of BTC in the buy wall after covering and reshort.

The problem with the above is that it assumes the price of BTS remains fixed relative to USD. This is why shorting with BitUSD as collateral would be better. But with this limitation it just means the price of the buy and sell walls in terms of USD would have to grow and shrink as the price of BTS goes up and down respectively. But if we are betting on eventually breaking away from BTC and all the other altcoins and growing the price of BTS relative to BTC and USD, this is a sensible strategy for our market making bots, isn't it? It allows the market making bots to maintain symmetric height (in dollar value) walls which do not depend on fluctuations in BTC price but do grow taller as the price of BTS grows relative to the dollar. Also keep in mind I am not including the effect of short interests here.

[mint chocolate chip]

Number 4 on bter!!

https://bter.com/

Isn't that "X" the old logo, isn't there a bitUSD logo that should be there?

[toast]

bot open for all  https://bitsharestalk.org/index.php?topic=13388.0

[Rune]

Number 4 on bter!!

https://bter.com/

[Rune]

It's a little early to call their downfall IMO. I'm sure they still have enough to buy back all outstanding nubits.

I didn't want to open source the bot because 1) I didn't want competition (but it's there now) and 2) I'm embarrassed by my code quality (but that's a bad reason)

Perhaps I will open it up today or over this weekend

NuBits will continue for sure. But soon they'll be subjected to the same kind of standard that rational people subject other exchanges/counterparties too, such as cryptographic proof of reserves. They'll have to eventually come up with a system to basically copy BitUSD and its backing entirely if they want to maintain credibility. If we just have acceptable liquidity and spreads in the meantime, some of the non-retarded traders might switch to BitUSD.

[toast]

It's a little early to call their downfall IMO. I'm sure they still have enough to buy back all outstanding nubits.

I didn't want to open source the bot because 1) I didn't want competition (but it's there now) and 2) I'm embarrassed by my code quality (but that's a bad reason)

Perhaps I will open it up today or over this weekend

[xeroc]

Damnit I am off for skiing the weekend without access to my wallet .. shit .. missed that opportunity :/

[Rune]

Wondering what you can do to help bitshares up to the 1.0 launch?

Toast has written a market maker bot for BTC/BitUSD on bter.com that Riverhead is now running (possibly others)

https://bter.com/trade/btc_bitusd

Volume is only 10 BTC so far, but notice the spread is around 5%. If you check out NuBits you can see that their spread is more or less the same: https://bter.com/trade/nbt_btc

This is most likely because the "trusted" custodians have lost shitloads of money by getting BTC dumped on them in the last crash, so they have widened their spread in an attempt to make money so they'll  stop being a fractional reserve. This is our moment to steal their market and surpass them as _the_ 1 USD token. All we have to do is to keep our spread lower, and then pump the volume! BTC isn't crashing any more so market making at a small spread will be profitable!

If you want to help BitUSD get adoption then get on bter now and start trading!!! Lets push the volume to at least 100 BTC as soon as possible!

Do you have a link to the market maker bot post?

No, I don't think there is any post about it. I gave 5k bitUSD to riverhead to fund his bot with. If you want to help with liquidity but don't want to run the bot yourself you can do the same, he's a trusted community member and won't mess up.

If you want to run the bot yourself then get in touch with toast.

Sounds interesting ..

Do you know the reason @toast is not opensourcing the bot?

I'm pretty sure he plans to do it as soon as it is ready.

Buy BitUSD and get it on bter.com guys!!! Buy low sell high and make some money as we make nubits unravel over the next couple of days.

[xeroc]

Wondering what you can do to help bitshares up to the 1.0 launch?

Toast has written a market maker bot for BTC/BitUSD on bter.com that Riverhead is now running (possibly others)

https://bter.com/trade/btc_bitusd

Volume is only 10 BTC so far, but notice the spread is around 5%. If you check out NuBits you can see that their spread is more or less the same: https://bter.com/trade/nbt_btc

This is most likely because the "trusted" custodians have lost shitloads of money by getting BTC dumped on them in the last crash, so they have widened their spread in an attempt to make money so they'll  stop being a fractional reserve. This is our moment to steal their market and surpass them as _the_ 1 USD token. All we have to do is to keep our spread lower, and then pump the volume! BTC isn't crashing any more so market making at a small spread will be profitable!

If you want to help BitUSD get adoption then get on bter now and start trading!!! Lets push the volume to at least 100 BTC as soon as possible!

Do you have a link to the market maker bot post?

No, I don't think there is any post about it. I gave 5k bitUSD to riverhead to fund his bot with. If you want to help with liquidity but don't want to run the bot yourself you can do the same, he's a trusted community member and won't mess up.

If you want to run the bot yourself then get in touch with toast.

Sounds interesting ..

Do you know the reason @toast is not opensourcing the bot?

[liondani]

needs no comment!   

JordanLee

This is a great idea that should be evaluated more closely. The most important question is what is the cost of this insurance? Perhaps historical charts of BTC and contract pricing can give us a good idea of that. Once that is understood, we would be in a position to discuss doing this on a pilot basis, which if successful, could expand to being used for all BTC held by Jamie And KTm. Whether LPCs providing their own funds use this type of insurance is really up to them individually. They just need to decide if they wish to speculate on the price of BTC. We should avoid speculation with shareholder funds where practical, however.

Whether such an action requires shareholder approval as an amendment to existing contracts is a grey area. I would say if it doesn't seem to create controversy here in the forum, formal shareholder approval is not needed. Whether it creates controversy will largely depend on the cost of this insurance.

@pennybreaker, if you are interested in taking on the task of assessing the cost of this insurance, I would encourage you to do so and bill for it.

Edit: It would also make sense to consider hedging the BTC that comes from NuShare sales, which currently is about 350 BTC. We need to keep some of the NuShare sale proceeds as BTC so that they can function as tier 4 buy side liquidity, which has been used on several occasions to make raising interest rates unnecessary.

[Rune]

With 5% spread it should be easy enough. In the future we could actually run nubot style "BitBots" that can enforce a much tighter peg and be guaranteed to be profitable, using the method the nubitters described here after they realized that they've become insolvent and their peg is doomed: https://discuss.nubits.com/t/possible-solution-to-custodian-loss-of-value-due-to-btc-exposure/1099/3

Increasing spread size helps compensate for losses due to adverse selection, but you can price yourself out of the market like that.

Agree, but right now nubits are offering a 5% spread too so as long as we offer the same it should be competetive.

[monsterer]

With 5% spread it should be easy enough. In the future we could actually run nubot style "BitBots" that can enforce a much tighter peg and be guaranteed to be profitable, using the method the nubitters described here after they realized that they've become insolvent and their peg is doomed: https://discuss.nubits.com/t/possible-solution-to-custodian-loss-of-value-due-to-btc-exposure/1099/3

Increasing spread size helps compensate for losses due to adverse selection, but you can price yourself out of the market like that.

[Rune]

Wondering what you can do to help bitshares up to the 1.0 launch?

Toast has written a market maker bot for BTC/BitUSD on bter.com that Riverhead is now running (possibly others)

https://bter.com/trade/btc_bitusd

Volume is only 10 BTC so far, but notice the spread is around 5%. If you check out NuBits you can see that their spread is more or less the same: https://bter.com/trade/nbt_btc

This is most likely because the "trusted" custodians have lost shitloads of money by getting BTC dumped on them in the last crash, so they have widened their spread in an attempt to make money so they'll  stop being a fractional reserve. This is our moment to steal their market and surpass them as _the_ 1 USD token. All we have to do is to keep our spread lower, and then pump the volume! BTC isn't crashing any more so market making at a small spread will be profitable!

If you want to help BitUSD get adoption then get on bter now and start trading!!! Lets push the volume to at least 100 BTC as soon as possible!

Do you have a link to the market maker bot post?

No, I don't think there is any post about it. I gave 5k bitUSD to riverhead to fund his bot with. If you want to help with liquidity but don't want to run the bot yourself you can do the same, he's a trusted community member and won't mess up.

If you want to run the bot yourself then get in touch with toast.

[vlight]

Actually hedging their BTC is a viable strategy and if they had used that one from the start things would have looked much better for them. But at this point they are already insolvent and are operating as a fractional reserve that should soon go down in flames.

A bitshares market maker could copy the hedging strategy and make a bot that could be guaranteed to be profitable as long as it operated on a 1-2% spread.

They have to use external services which means increased risk. They have to use high leverage, which adds to the overall risk even more. High leverage is bad. Just look what swiss central bank did to largest forex brokers and their clients. imho

[Rune]

https://bitcointalk.org/index.php?topic=926934.0

lololol, they want to use 10x leverage..... hahaha this is game over ... that disqualifies Nubits as a competition to BitUSD.

Actually hedging their BTC is a viable strategy and if they had used that one from the start things would have looked much better for them. But at this point they are already insolvent and are operating as a fractional reserve that should soon go down in flames.

A bitshares market maker could copy the hedging strategy and make a bot that could be guaranteed to be profitable as long as it operated on a 1-2% spread.

[Rune]

I'll be interest to know if you manage to break even with this strategy - market making is very hard to get right.

With 5% spread it should be easy enough. In the future we could actually run nubot style "BitBots" that can enforce a much tighter peg and be guaranteed to be profitable, using the method the nubitters described here after they realized that they've become insolvent and their peg is doomed: https://discuss.nubits.com/t/possible-solution-to-custodian-loss-of-value-due-to-btc-exposure/1099/3

[vlight]

https://bitcointalk.org/index.php?topic=926934.0

lololol, they want to use 10x leverage..... hahaha this is game over ... that disqualifies Nubits as a competition to BitUSD.

[monsterer]

I'll be interest to know if you manage to break even with this strategy - market making is very hard to get right.

[Rune]

http://www.reddit.com/r/CryptoCurrency/comments/2smt81/proof_that_nubits_fractional_reserve_get_out_now/

Rune = rune4444 = shuai

[nomoreheroes7]

lol rune, are you shuai?

Nice post whoever wrote that. Just controversial enough to stir up some shit and get people thinking.

[Rune]

https://bitcointalk.org/index.php?topic=926934.0

[lafona]

Wondering what you can do to help bitshares up to the 1.0 launch?

Toast has written a market maker bot for BTC/BitUSD on bter.com that Riverhead is now running (possibly others)

https://bter.com/trade/btc_bitusd

Volume is only 10 BTC so far, but notice the spread is around 5%. If you check out NuBits you can see that their spread is more or less the same: https://bter.com/trade/nbt_btc

This is most likely because the "trusted" custodians have lost shitloads of money by getting BTC dumped on them in the last crash, so they have widened their spread in an attempt to make money so they'll  stop being a fractional reserve. This is our moment to steal their market and surpass them as _the_ 1 USD token. All we have to do is to keep our spread lower, and then pump the volume! BTC isn't crashing any more so market making at a small spread will be profitable!

If you want to help BitUSD get adoption then get on bter now and start trading!!! Lets push the volume to at least 100 BTC as soon as possible!

Do you have a link to the market maker bot post?

[liondani]

We will know they are in trouble when they start offering interest to park.

I think they are already in trouble....http://coinmarketcap.com/assets/nushares/#charts

NuShares 35% decline, the biggest from all** cryptos right now!
Lee is probably selling before his supporters have the change to do it... 

edit:
** the biggest decline from the 100 major crypto-currencies

[Empirical1.1]

We will know they are in trouble when they start offering interest to park.

I expect that their system could collapse quickly at that point.

I didn't understand any of the equations Nubits used, I can only do A+B=C. But it seemed they gave both systems a similar failure risk, even though BitUSD is a heavily collateralised system and theirs has very little collateral and relies on a parking premium to incentivise demand. I expect their system will collapse with a significant rise in interest rates, because that signifies a significant fall in demand to the market and only then, do you have to worry about how much interest they can afford to pay and for how long they'll do it before giving up if the system is getting away from them.

Hmm. Well my description is wrong in that the interest rate incentivises parking which removes supply but I guess it also incentivises demand in that new demand might buy NuBits just to park and earn interest. I think.

[bytemaster]

We will know they are in trouble when they start offering interest to park. 

[Rune]

Okay they just added their huge walls back at a 1% spread... Well, we can still beat them at this if we just get somewhat close. Having those artificial walls means they lose money over time. We just need to educate people that our collateral is more sound, and then get volume and walls going!

edit: aaand it's gone.

I have a feeling people are cashing out of nubits and into other cryptos, and the market makers are running out of collateral to enforce the peg with, so they're wary of putting up the nubits sell wall. If we got BitUSD/BTC running as well we can contribute to the meltdown!

[btswildpig]

Crossposted to the chinese forum in crappy chinese:

https://bitsharestalk.org/index.php?topic=13376.0

This has to be done as a community effort, this is our chance to finally get an easy way into bitUSD! If you have any BitUSD to spare, put it on the exchange and start market making!

Totally nailed it

[fuzzy]

Wondering what you can do to help bitshares up to the 1.0 launch?

Toast has written a market maker bot for BTC/BitUSD on bter.com that Riverhead is now running (possibly others)

https://bter.com/trade/btc_bitusd

Volume is only 10 BTC so far, but notice the spread is around 5%. If you check out NuBits you can see that their spread is more or less the same: https://bter.com/trade/nbt_btc

This is most likely because the "trusted" custodians have lost shitloads of money by getting BTC dumped on them in the last crash, so they have widened their spread in an attempt to make money so they'll  stop being a fractional reserve. This is our moment to steal their market and surpass them as _the_ 1 USD token. All we have to do is to keep our spread lower, and then pump the volume! BTC isn't crashing any more so market making at a small spread will be profitable!

If you want to help BitUSD get adoption then get on bter now and start trading!!! Lets push the volume to at least 100 BTC as soon as possible!

Every day, I want to drink a beer with you more...

Crossposted to the chinese forum in crappy chinese:

https://bitsharestalk.org/index.php?topic=13376.0

This has to be done as a community effort, this is our chance to finally get an easy way into bitUSD! If you have any BitUSD to spare, put it on the exchange and start market making!

Nice job on the crappy chinese, though I assure you most of our Chinese is worse.

[Rune]

Crossposted to the chinese forum in crappy chinese:

https://bitsharestalk.org/index.php?topic=13376.0

This has to be done as a community effort, this is our chance to finally get an easy way into bitUSD! If you have any BitUSD to spare, put it on the exchange and start market making!

[kaibakker]

 

[Rune]

Wondering what you can do to help bitshares up to the 1.0 launch?

Toast has written a market maker bot for BTC/BitUSD on bter.com that Riverhead is now running (possibly others)

https://bter.com/trade/btc_bitusd

Volume is only 10 BTC so far, but notice the spread is around 5%. If you check out NuBits you can see that their spread is more or less the same: https://bter.com/trade/nbt_btc

This is most likely because the "trusted" custodians have lost shitloads of money by getting BTC dumped on them in the last crash, so they have widened their spread in an attempt to make money so they'll  stop being a fractional reserve. This is our moment to steal their market and surpass them as _the_ 1 USD token. All we have to do is to keep our spread lower, and then pump the volume! BTC isn't crashing any more so market making at a small spread will be profitable!

If you want to help BitUSD get adoption then get on bter now and start trading!!! Lets push the volume to at least 100 BTC as soon as possible!