Author Topic: BitUSD Market Maker - Proposal for Discussion  (Read 34109 times)

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Offline Empirical1

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The percentage of people wanting to short on average is greater than the percentage of people willing to genuinely go long.

What about instead of price feeds first trying upping the collateral required?

A certain range of collateral required could make those two percentages exist (genuine shorts vs. longs) in a better equilibrium very close to the peg without price feeds?

The more collateral required the more secure the BitAsset system is too, which will also bring in more genuine longs.

Offline tonyk

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I gave it more thought. I am kind of OK with now new shorts below the 'current price' (be it feed based or average based).

Just please consider starting bitBTC instead of bitUSD, I believe we will learn more that way.
And yes, with less crushing clients more people will participate.

0.02BTSX
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline Agent86

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There's nothing wrong with large demand for short-selling per se. That just reflects optimism about the near-term value of BTSX. (I don't believe that the demand is in any way due to the belief that BitUSD could be going to zero, not with I3's open commitment to helping the peg to hold.) In a liquid market, huge short selling should simply translate into faster price appreciation--just like large options or futures trades lead to price discovery in equities. So why did the price of BTSX go down despite large short sales? I think there were confounding events--wallet bugs, natural correction after the run-up to launch--that made some people believe that short-selling would not lead to BTSX price appreciation. Also, up to now the market rules may have been a bit too favorable and not punitive enough to short-selling. Why not make a conservative change, like increasing collateral requirements or increasing the margin call penalty, and see then if the market can achieve a good peg on its own?

It's clear that achieving a stable peg would help immensely in increasing confidence and growing the network. We all agree that getting there sooner is better than getting there later. But, to really condition traders' expectations and build confidence for long-term success, we need to prove that the peg can work without a heavy-handed restriction based on price feeds. Market participants need a chance to condition their beliefs and learn. Disallowing short sales below the median feed price would not give them this opportunity. Furthermore, such a stop-gap measure is not really a long-term solution. Even if such a measure enforced the peg for now, it would really be a crutch that would become harder and harder to remove over time. If the crutch seemed to work for now, it would prevent true price discovery, much like the blunt short-sale prohibitions for traditional equities that proved to be ill-advised. When the network size is much bigger in the future, it could be very difficult to remove the crutch without causing widespread concern about the robustness of the peg, simply because the market would not have learned on its own to achieve a viable peg. What if the crutch were dispensed at some point and the peg began to fail again? Confidence could be shattered. I believe it would be a mistake to try to bypass the steady learning and conditioning process that needs to take place for long-term robustness of the peg.

So, I say let the market work mostly on its own for a little while longer, when the costs of failure are relatively low. See if things get better. Fix bugs in the client, make it easy for more people to get on the network and participate in the internal market. Make one or two simple, conservative changes to the market rules that don't rely on price feeds. E.g., just increasing collateral requirements from 2x to 3x, decreasing the margin call price, and/or increasing the margin call penalty to 10% may be enough to restore balance between shorts and longs. If the peg can start to hold better with minimal changes, that would be a home run and far superior than using a heavy-handed approach such as restricting short sales below a median price feed.
The price feed is not a "crutch."  It is not "training wheels."  It is an inherently required part of the system that should not ever be removed.  BUT THERE IS NOTHING WRONG WITH USING A PRICE FEED.  It doesn't diminish the accomplishment or usefulness of bitUSD.

Offline liondani

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we must give more time to the market... it's really to early for conclusions...  I like every day the original approach from bytemaster more and more...  cause the sharp correction many of us makes wrong conclusions dependent on emotions...  If we see the bigger picture bytemaster approach is long-term  better than agents86...  agents86 proposal is much better in short-term...

Offline amatoB

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There's nothing wrong with large demand for short-selling per se. That just reflects optimism about the near-term value of BTSX. (I don't believe that the demand is in any way due to the belief that BitUSD could be going to zero, not with I3's open commitment to helping the peg to hold.) In a liquid market, huge short selling should simply translate into faster price appreciation--just like large options or futures trades lead to price discovery in equities. So why did the price of BTSX go down despite large short sales? I think there were confounding events--wallet bugs, natural correction after the run-up to launch--that made some people believe that short-selling would not lead to BTSX price appreciation. Also, up to now the market rules may have been a bit too favorable and not punitive enough to short-selling. Why not make a conservative change, like increasing collateral requirements or increasing the margin call penalty, and see then if the market can achieve a good peg on its own?

It's clear that achieving a stable peg would help immensely in increasing confidence and growing the network. We all agree that getting there sooner is better than getting there later. But, to really condition traders' expectations and build confidence for long-term success, we need to prove that the peg can work without a heavy-handed restriction based on price feeds. Market participants need a chance to condition their beliefs and learn. Disallowing short sales below the median feed price would not give them this opportunity. Furthermore, such a stop-gap measure is not really a long-term solution. Even if such a measure enforced the peg for now, it would really be a crutch that would become harder and harder to remove over time. If the crutch seemed to work for now, it would prevent true price discovery, much like the blunt short-sale prohibitions for traditional equities that proved to be ill-advised. When the network size is much bigger in the future, it could be very difficult to remove the crutch without causing widespread concern about the robustness of the peg, simply because the market would not have learned on its own to achieve a viable peg. What if the crutch were dispensed at some point and the peg began to fail again? Confidence could be shattered. I believe it would be a mistake to try to bypass the steady learning and conditioning process that needs to take place for long-term robustness of the peg.

So, I say let the market work mostly on its own for a little while longer, when the costs of failure are relatively low. See if things get better. Fix bugs in the client, make it easy for more people to get on the network and participate in the internal market. Make one or two simple, conservative changes to the market rules that don't rely on price feeds. E.g., just increasing collateral requirements from 2x to 3x, decreasing the margin call price, and/or increasing the margin call penalty to 10% may be enough to restore balance between shorts and longs. If the peg can start to hold better with minimal changes, that would be a home run and far superior than using a heavy-handed approach such as restricting short sales below a median price feed.

Offline Riverhead

Just my two cents. The first thing that needs to be implemented is an auto update feature. This will ensure people are up to date on their version and we don't get the "Insufficient Depth" too much anymore.

I think the insufficient depth comes from I3 pulling their BTSX off the bid/ask. They were artificially creating depth by throwing their shares in the market. This would explain how they are able to halt trading. I certainly hope there isn't a kill switch otherwise.

I think the next fork will lower the depth requirement since participation isn't as robust as they thought.
That's exactly it. There is no kill switch, just I3 with a King's ransom 8)

Offline Method-X

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Just my two cents. The first thing that needs to be implemented is an auto update feature. This will ensure people are up to date on their version and we don't get the "Insufficient Depth" too much anymore.

 +5%

Ggozzo

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Just my two cents. The first thing that needs to be implemented is an auto update feature. This will ensure people are up to date on their version and we don't get the "Insufficient Depth" too much anymore.

I think the insufficient depth comes from I3 pulling their BTSX off the bid/ask. They were artificially creating depth by throwing their shares in the market. This would explain how they are able to halt trading. I certainly hope there isn't a kill switch otherwise.

I think the next fork will lower the depth requirement since participation isn't as robust as they thought.

Offline Blahbleuhbleuh

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Just my two cents. The first thing that needs to be implemented is an auto update feature. This will ensure people are up to date on their version and we don't get the "Insufficient Depth" too much anymore.

Offline CLains

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 +5% is the next big thing that will drive the price to the moon

Ggozzo

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One way to absorb the short selling pressure to bitUSD is to throw more bitAssets on the market !!!
Think about it! The only way for someone to "bet" for BTSX if they don't have fresh money/BTC is to short a bitAsset....
Right now there is available only bitUSD, so all the pressure from the BTSX Bulls go there ... If we had bitCNY,bitEUR,bitBTC etc. the pressure would absorb "equally" to all...
so the market peg would be closer to parity for each of one, at least it would helped to some degree...

EXAMPLE:

bitUSD = -30% distance from parity point
bitEUR = -20% distance from parity point
bitCNY = -10% distance from parity point

so a smart BTSX BULL  that want to short a bitAsset because they think BTSX will rise 50%, will likely short bitCNY  ;D
so the end result on profits would be 50-10= 40% profit (when bitCNY gets 1:1 pegged vs CNY)
instead of 50-30= 20% profit (when bitUSD gets 1:1 pegged vs USD)

I know I have oversimplified my thought process but I wanted to give the idea...

Generalised, the current problem is that there are 50m USD worth of BTSX and 0.5m worth of BitAssets (all BitUSD). As long as this ratio is so extreme the BTSX bulls will have an enormous impact on BitAsset peg volatility. More different BitAssets will help close this gap.

But, if there is more bitUSD out there, there are more people trying to SELL it and less buyers because it's already been printed?

Offline coolspeed

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Offline f_bull

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市场锚定?!这是开发者最脑残的想法!一点金融常识都没有,更是违背去中心化和区块链的本质!区块链的核心是不需要信任对方,而BTSX脑残地认为应该信任BitUSD=USD,应该信任喂价。。。。。

Offline yiminh

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I don't like playing shorts because the risk is limitless or at least your entire collateral, but that's the only way to play in the exchange if you think BTSX will go up in value, maybe we should have a options market for the BTSX longs. We may want to open a limited options market or bond market to test first, if all goes well, then open the BitUSD/BTSX market.

Offline yiminh

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For a short position to maximize their return they should cover and re-short as often as possible. 

That's totally unture for a large short trade( like 10,000 BitUSD short in this market).