Can you really earn 5% on Anything? That sounds like a Ponzi!

[JakeThePanda]

If you put in 10 bitUSD, you'll get back 10.5 bitUSD in a year. You're saying that for some reason you expect BitUSD/(USD + premium) to go down in that time as well. But whole point of BitUSD is that the market is supposed to be constantly pushing it back towards the real BitUSD/(USD + premium) by trading value in terms of BTS.

If price remains stable, then why would someone go short and pay 5% interest?  If I pay 5%, I have to get something in return like volatility.

You would only go short if you expect the value of the asset you are shorting to go down relative to BTS. The price remains stable when people are roughly divided about which direction the ratio will go.

I think BTS will rise by much more than 5% during the first year, so I would short sell BitUSD.

Sorry, my light bulb turned on a little late.  I got it.  Thanks for the replies.

[toast]

If you put in 10 bitUSD, you'll get back 10.5 bitUSD in a year. You're saying that for some reason you expect BitUSD/(USD + premium) to go down in that time as well. But whole point of BitUSD is that the market is supposed to be constantly pushing it back towards the real BitUSD/(USD + premium) by trading value in terms of BTS.

If price remains stable, then why would someone go short and pay 5% interest?  If I pay 5%, I have to get something in return like volatility.

You would only go short if you expect the value of the asset you are shorting to go down relative to BTS. The price remains stable when people are roughly divided about which direction the ratio will go.

I think BTS will rise by much more than 5% during the first year, so I would short sell BitUSD.

[JakeThePanda]

If you put in 10 bitUSD, you'll get back 10.5 bitUSD in a year. You're saying that for some reason you expect BitUSD/(USD + premium) to go down in that time as well. But whole point of BitUSD is that the market is supposed to be constantly pushing it back towards the real BitUSD/(USD + premium) by trading value in terms of BTS.

If price remains stable, then why would someone go short and pay 5% interest?  If I pay 5%, I have to get something in return like volatility.

[Pocket Sand]

I'm still confused about 2 aspects, first when do you pay the 5% for shorts, after the first year or immediately when you start the long/short agreement, also can either participant exit the long/short deal at any time.

5% continuously (APR?)
there is a global market for long/short positions

Wasn't sure if it was APR or on a strict 1 year contract, thanks for clearing it up.

[toast]

I'm still confused about 2 aspects, first when do you pay the 5% for shorts, after the first year or immediately when you start the long/short agreement, also can either participant exit the long/short deal at any time.

5% continuously (APR?)
there is a global market for long/short positions

[Pocket Sand]

I'm still confused about 2 aspects, first when do you pay the 5% for shorts, after the first year or immediately when you start the long/short agreement, also can either participant exit the long/short deal at any time.

[toast]

Have you seen this?

http://www.youtube.com/watch?v=5BV55IrZi7g

[JakeThePanda]

If you put in 10 bitUSD, you'll get back 10.5 bitUSD in a year. You're saying that for some reason you expect BitUSD/(USD + premium) to go down in that time as well. But whole point of BitUSD is that the market is supposed to be constantly pushing it back towards the real BitUSD/(USD + premium) by trading value in terms of BTS.

In the case of shitty corporate bonds the company loses value and so you don't get 5%. In the case of BitUSD the short position covers your losses "behind the scenes" out of their collateral.

Of course they should be careful with advertising nonetheless

Hmm, I thought I was clear on this.  Where can I read about how they keep the market prices in line?

[toast]

If you put in 10 bitUSD, you'll get back 10.5 bitUSD in a year. You're saying that for some reason you expect BitUSD/(USD + premium) to go down in that time as well. But whole point of BitUSD is that the market is supposed to be constantly pushing it back towards the real BitUSD/(USD + premium) by trading value in terms of BTS.

In the case of shitty corporate bonds the company loses value and so you don't get 5%. In the case of BitUSD the short position covers your losses "behind the scenes" out of their collateral.

Of course they should be careful with advertising nonetheless

[bytemaster]

Assuming a constant interest-rate difference between real USD and it USD the premium will be the same when you buy or sell.  Because you have 5% more bit USD you will see a real return.

Any errors are due to speech to text On my phone


Sent from my iPhone using Tapatalk

[JakeThePanda]

Because these never mature premium when you still is the same as the premium when you buy


Sent from my iPhone using Tapatalk

Sorry, I'm not following you.  Are you saying I will sell at the same price that I bought at?

[bytemaster]

Because these never mature premium when you still is the same as the premium when you buy


Sent from my iPhone using Tapatalk

[JakeThePanda]

If you only paid 90 cents for it and the interest rate didn't change then you would only be able to sell your 1.05 BitUSD for $0.945 and thus your return would still be 5%

But $0.045 on $0.90 is 10.5%.....

I think I'm missing something.  If I buy it at 90 cents and wait a year and I have to sell it at 85 cents , now I have a loss of .83%.  I may have made 5% in interest but price depreciated by 5.56%.  If it acts like a bond then I don't care about the coupon, I care about the total return. In this case my total return was negative.  What's missing?

Your return was negative because you assumed BitUSD depreciated by 5 cents

Yes I know that.  My point is that I'm not sure advertising that you can earn 5% is correct.  I can find you any number of corporate bonds that have interest payments of 10+%, does that mean you are going to yield 10%?  Of course not.  The price is well above par and when it matures you find out your total return is actually 0.84%.  Please help me understand why I'm wrong.

[toast]

If you only paid 90 cents for it and the interest rate didn't change then you would only be able to sell your 1.05 BitUSD for $0.945 and thus your return would still be 5%

But $0.045 on $0.90 is 10.5%.....

I think I'm missing something.  If I buy it at 90 cents and wait a year and I have to sell it at 85 cents , now I have a loss of .83%.  I may have made 5% in interest but price depreciated by 5.56%.  If it acts like a bond then I don't care about the coupon, I care about the total return. In this case my total return was negative.  What's missing?

Your return was negative because you assumed BitUSD depreciated by 5 cents

[bytemaster]

The only reason for the price to fall is if the interest rate changed.  there will be a small spread. 


Sent from my iPhone using Tapatalk