Massive BitAsset Growth ! - Analysis

[biophil]

If I want to realize my BTS profits, I sell BTS and buy BitUSD

But wouldn't that cause an inverse correlation ?

It could, but it would depend on the volumes involved. Think through what I'm saying in a little more detail and I bet you'll get it.

The fact that there's BitAsset growth is the significant thing. It doesn't really matter where its coming from because the system is starting to work by virtue of delivering liquidity to complimentary markets

Agreed.

The difference with Tether is that BitUSD is "real money" held on the blockchain so when you hold it it cannot be defaulted on. Tether on the other hand is just a worthless token promise. It's the bank that holds the actual liquidity. Subtle theoretical difference but huge practical one because in one case you could be holding bottle tops for all you know and in the other the real thing backed by real markets.

Yes, except that strictly speaking BitUSD can be defaulted on algorithmically if a "black swan" occurs. This is a very important systemic risk that, to my knowledge, has not been properly quantified. We just say "well we're pretty safe because imagine how difficult it would be for BTS to lose that much value in such a short time!" So I'm actively working to reduce my exposure to BitUSD.

But I'm pretty risk-averse, so maybe I'm overestimating the chances of a black swan.

[toknormal]

If I want to realize my BTS profits, I sell BTS and buy BitUSD

But wouldn't that cause an inverse correlation ? What we're seeing is a positive correlation. There might be something to it though because I now remember that there was a 2-week delay between the BTS and BitUSD spikes back in June.

All the same, look at the market now. We have a massive spike in BitAsset liquidity and ALSO a buoyant BTS valuation. That seems to me positively correlated, implying that the BitAsset demand is independent of BTS market demand. BTS is needed anyway to collateralise that liquidity even if itself is also experiencing a sell-off.

The fact that there's BitAsset growth is the significant thing. It doesn't really matter where its coming from because the system is starting to work by virtue of delivering liquidity to complimentary markets:

 • those requiring store of value
 • those requiring pegged trading liquidity

The difference with Tether is that BitUSD is "real money" held on the blockchain so when you hold it it cannot be defaulted on. Tether on the other hand is just a worthless token promise. It's the bank that holds the actual liquidity. Subtle theoretical difference but huge practical one because in one case you could be holding bottle tops for all you know and in the other the real thing backed by real markets.

[biophil]

the correlation between BTS and BitAssets is because BitAssets are being used by holders of BTS to store their recent profits.

How does that make sense ? They'd be taking the short side of the bit asset whereas to "cashout" (i.e. do a genuine profit take) they'd have to take the long side which means sell their BTS for BitAsset liquidity (or real dollars) as opposed to simply collateralising it.

If I want to realize my BTS profits, I sell BTS and buy BitUSD (open a long position in BitUSD). This drives up the price of BitUSD, which incentivizes BTS holders to borrow more BitUSD (open short positions) to satisfy my demand. Make sense?

If that's happening, it's possible that a BTS price increase drives the creation of BitUSD, not the other way around. Given the fact that all cryptos are pumping indiscriminately, I don't see any reason to suspect it's the other way around.

Of course in reality it's certainly not a question of one mechanism or the other; both are happening and it can be hard to disentangle them.

But this is all nitpicking. I agree with you that BitUSD is far superior to Tether, and it's important for us to get that message out.

[toknormal]

the correlation between BTS and BitAssets is because BitAssets are being used by holders of BTS to store their recent profits.

How does that make sense ? They'd be taking the short side of the bit asset whereas to "cashout" (i.e. do a genuine profit take) they'd have to take the long side which means sell their BTS for BitAsset liquidity (or real dollars) as opposed to simply collateralising it.

[biophil]

The correlation between BTS and BitAssets suggests to focus on these assets as a drive for BTS growth.

The other simple conclusion we could draw has the opposite causation:

the correlation between BTS and BitAssets is because BitAssets are being used by holders of BTS to store their recent profits. BTS has pumped wildly as it rides the ambient cryptocurrency wave, and BItAssets are the most natural place to cash out to.

Any way to tell whether it's one or the other?

[yvv]

BTS is growing, which means shorting is profitable.

[bob_ggg]

The correlation between BTS and BitAssets suggests to focus on these assets as a drive for BTS growth. This focus requires at least to

• improve the liquidity of the market; the development of a bot is in the works;
• leverage the existence of a reserve fund to create a monetary policy that stabilizes the valuation of the BitAssets whatever the market conditions are (see a recent post on this subject);
• create awareness of the alternative advantages of these assets wrt Tether and similar alternatives.
• improve the quality of the data (this seems to be a still open issue with bitCNY) so that there is no concern about the valuation of the assets.

As you said, this could be the driver for an explosive growth if/when Tether unfolds.

[toknormal]

Hi

I am a long time lurker and holder. I generally keep one eye open for activity in the BTS markets but recently I noticed this huge growth in circulation of the BitAssets - particularly BitUSD and BitCNY. I've been expecting this for a long time (in fact I expected it would happen a couple of years ago and then went to sleep when it didn't).

Now I've woken up again.

I realise that $30 Million is a drop in the ocean (for BitUSD for example) but from a strategic point of view I think this is huge. I've been wracking my brain over 3 things:

1. why it so suddenly took off back in April
2. why it is now accelerating

and

3. why the BTC ratio is not as spikey as it was in June despite a far larger BitAsset growth (requiring proportionally more collateral).

Well 3 is easily explainable by BTC's massive growth against the dollar, so that's fine. My own theory for 2 is that with the Bitfinex/Tether adverse publicity, the advantages of a pure crypto, trustless pegged blockchain asset over a bank-backed one are starting to dawn on the market (lightbulbs going on).

I still have no clue to the suddenness of point 1 though. (By the way BitCNY is the same - off the charts growth in the last month so I didn't bother showing it separately).

*********** Market Observations ***********

There are some very interesting observations to be made from the last 8 months - namely, it's quite beautiful IMO the way that the BTS price perfectly correlates with the BitAsset supply (BitAsset marketcap can be used as a proxy for supply since the dollar price is constant). This indicates that the network and economics of the system is actually working as intended and that BTS isn't just being used as a speculative bottle-top asset like, say, Litecoin is. (That's why I invested in this in the first place).

Second observation is regarding the BTS/BTC ratio. We can see that despite BTC's massive 700% growth since last June, BTS is starting to recover its value even against BTC. What this tells me is that BTS is excellently decoupled in the sense that the more BitUSD et al get used as cash pairs for crypto markets, the better BTS can perform BOTH in times of BTC growth and especially during corrections (when increasing numbers cash out to BitUSD instead of the toxic Tether).

Third observation should be stark and slightly humbling: Tether has a circulating supply of 1.4 billion and is created by a single company, not a real crypto, not trustless and already toxic. The whole point of a blockchain is that you hold what you have in your wallet. i.e. it isn't a promissory note (as Tether is). Meanwhile BitUSD's circulation is approx 30 million. The BitAssets are bound to grow to at least the marketcap of Tether as understanding proliferates IMO.

The implication is a 1400% growth just to that level alone. If we confine the growth to only the USD cash market currently occupied by Tether then that would represent a 46 times growth in BitUSD. Given the close correlation shown in the traces below between BitUSD circulation and BTS dollar price, than would mean BTS at a Bitcoin ratio of 0.022 (currently 0.000042) if BTC were to stay at current $USD exchange rate.

Lets say that BTC grows to $40,000 this year though and BitUSD only captures 10% of the Tether market. That would still represent a doubling of the BTS price in bitcoin and a 460% increase in the BTS dollar price. The reason I'm becoming increasingly bullish now is that the growth in BitAsset circulation seems to be finally taking off after years of laying the groundwork. Confidence in the network, calamities in competing "pseudo pegged-assets" and a general explosion of capital arriving in the sector as a whole seem to have lit the touchpaper.

All to play for !