Author Topic: yield on bitAssets not enough?  (Read 3557 times)

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Offline tonyk

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Alex hey - I don't care who that is, but about motivation. bot is just fine. I just care that there must be enough buyers at 100% also at times BTSX looks cheap. Otherwise bot won't be able to short at 100% and ther won't be market cap and liquidity of bitSLV. So I am trying to understand who are these buyers at 100% - they are not BTSX bulls and not bitSLV market makers...

The buyers at 100% are the people that want to hold some value as SLV. If there are none there won't be any bitSLV in existence. Seems like you're saying it's bad if there aren't bitSLV in circulation, but why? There's shouldn't be any unless someone wants to hold SLV over BTSX.

If there is no bitSLV in circulation, then where BTSX trading fees are coming from? ^^
We need actively traded bitAssets...

Fees from bitasset trading go into yield, not BTSX income. Though I suppose this could change if the yield is "too high".

Also, if you increase the yield, you are encouraging people to sit on their assets, not trade them. But I guess this is fine, that's what drives BTSX demand as it has to be locked up in collateral when people are sitting on the bitasset.

If having enough liquidity close to the peg does work without increase in yield, and so we get bitAssets issuance to 15-20% of BTSX market cap, then I am more than happy to own BTSX and thankful big time to people who buy bitAssets. :)

The BTSX market cap is a running target... :) do not expect your %s to be achieved overnight... maybe when BTSX gets to $100 a piece
« Last Edit: September 25, 2014, 08:02:59 pm by tonyk »
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline kisa

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Alex hey - I don't care who that is, but about motivation. bot is just fine. I just care that there must be enough buyers at 100% also at times BTSX looks cheap. Otherwise bot won't be able to short at 100% and ther won't be market cap and liquidity of bitSLV. So I am trying to understand who are these buyers at 100% - they are not BTSX bulls and not bitSLV market makers...

The buyers at 100% are the people that want to hold some value as SLV. If there are none there won't be any bitSLV in existence. Seems like you're saying it's bad if there aren't bitSLV in circulation, but why? There's shouldn't be any unless someone wants to hold SLV over BTSX.

If there is no bitSLV in circulation, then where BTSX trading fees are coming from? ^^
We need actively traded bitAssets...

Fees from bitasset trading go into yield, not BTSX income. Though I suppose this could change if the yield is "too high".

Also, if you increase the yield, you are encouraging people to sit on their assets, not trade them. But I guess this is fine, that's what drives BTSX demand as it has to be locked up in collateral when people are sitting on the bitasset.

If having enough liquidity close to the peg does work without increase in yield, and so we get bitAssets issuance to 15-20% of BTSX market cap, then I am more than happy to own BTSX and thankful big time to people who buy bitAssets. :)

Offline toast

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So what you really want is to encourage people to use this platform to trade, that's how both BTSX and bitasset holders make money.
Do not use this post as information for making any important decisions. The only agreements I ever make are informal and non-binding. Take the same precautions as when dealing with a compromised account, scammer, sockpuppet, etc.

Offline toast

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Alex hey - I don't care who that is, but about motivation. bot is just fine. I just care that there must be enough buyers at 100% also at times BTSX looks cheap. Otherwise bot won't be able to short at 100% and ther won't be market cap and liquidity of bitSLV. So I am trying to understand who are these buyers at 100% - they are not BTSX bulls and not bitSLV market makers...

The buyers at 100% are the people that want to hold some value as SLV. If there are none there won't be any bitSLV in existence. Seems like you're saying it's bad if there aren't bitSLV in circulation, but why? There's shouldn't be any unless someone wants to hold SLV over BTSX.

If there is no bitSLV in circulation, then where BTSX trading fees are coming from? ^^
We need actively traded bitAssets...

Fees from bitasset trading go into yield, not BTSX income. Though I suppose this could change if the yield is "too high".

Also, if you increase the yield, you are encouraging people to sit on their assets, not trade them. But I guess this is fine, that's what drives BTSX demand as it has to be locked up in collateral when people are sitting on the bitasset.
Do not use this post as information for making any important decisions. The only agreements I ever make are informal and non-binding. Take the same precautions as when dealing with a compromised account, scammer, sockpuppet, etc.

Offline kisa

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Alex hey - I don't care who that is, but about motivation. bot is just fine. I just care that there must be enough buyers at 100% also at times BTSX looks cheap. Otherwise bot won't be able to short at 100% and ther won't be market cap and liquidity of bitSLV. So I am trying to understand who are these buyers at 100% - they are not BTSX bulls and not bitSLV market makers...

The buyers at 100% are the people that want to hold some value as SLV. If there are none there won't be any bitSLV in existence. Seems like you're saying it's bad if there aren't bitSLV in circulation, but why? There's shouldn't be any unless someone wants to hold SLV over BTSX.

If there is no bitSLV in circulation, then where BTSX trading fees are coming from? ^^
We need large market cap, actively traded bitAssets for BTSX to be profitable..

Btw. can the 2 x amount of BTSX collateral for shorts be easily changed to less in the future if BTSX value stabilizes?
« Last Edit: September 25, 2014, 07:37:31 pm by kisa0145 »

Offline toast

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Alex hey - I don't care who that is, but about motivation. bot is just fine. I just care that there must be enough buyers at 100% also at times BTSX looks cheap. Otherwise bot won't be able to short at 100% and ther won't be market cap and liquidity of bitSLV. So I am trying to understand who are these buyers at 100% - they are not BTSX bulls and not bitSLV market makers...

The buyers at 100% are the people that want to hold some value as SLV. If there are none there won't be any bitSLV in existence. Seems like you're saying it's bad if there aren't bitSLV in circulation, but why? There's shouldn't be any unless someone wants to hold SLV over BTSX.
Do not use this post as information for making any important decisions. The only agreements I ever make are informal and non-binding. Take the same precautions as when dealing with a compromised account, scammer, sockpuppet, etc.

Offline kisa

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Alex hey - I don't care who that is, but about motivation. bot is just fine. I just care that there must be enough buyers at 100% also at times BTSX looks cheap. Otherwise bot won't be able to short at 100% and ther won't be market cap and liquidity of bitSLV. So I am trying to understand who are these buyers at 100% - they are not BTSX bulls and not bitSLV market makers...
« Last Edit: September 25, 2014, 06:41:09 pm by kisa0145 »

Offline alexkravets

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Wrt. diversification I have to disagree as bitAssets don't offer systematic diversification away from BTSX, while BTSX has superior risk/return characteristics...

Yes but there will probably be some profit taking that stays within BTSX. Rather than pay to convert BTSX at an exchange and then pay again to convert to fiat and then incur all the fees I listed above regards moving into silver, I'll find it much more worthwhile to go long BitSLV with some of my profit taking even though it will still have BTSX failure risk.

Not that I've actually properly shorted in practice yet, but in theory I should also be able to say short BitUSD with some of my BTSX while going long say BitSLV with another portion and keep the same overall exposure to BTSX at a time like this when I think the chance of BTSX falling a lot from this CAP is low.

Thanks Empirical appreciate your thoughts! The question I was pointing out to was that the guy who sells you bitSLV most likely BTSX bull and not rushing to cover. So when you decide to sell your bitSLV you need another willing buyer or you create downward pressure on bitSLV peg. Also an arbitrageur who might buy off you slightly below the peg will need a willing buyer closer to the peg. So I am just contemplating, if 5-10% yield will attract enough buyers at any time to ensure mkt depth and liquidity, given that there is likely to be strong interest in max shorting bitAssets. Hopefully as BM said there are enough diverse reasons apart from return for investing into bitSLV... or otherwise, at initial stage at least, shorts might need to share more of their profits with the longs...

Kisa, do you really care if the buyer of the bitSLV is another human trader or just a bot which just shorted the same amount of butSLV at parity and now is willing to cover at 99.5% of the peg ?

In other words, bytemaster's bot maybe good enough to bootstrap peg credibility in the early days ?

Offline Empirical1.1

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Wrt. diversification I have to disagree as bitAssets don't offer systematic diversification away from BTSX, while BTSX has superior risk/return characteristics...

Yes but there will probably be some profit taking that stays within BTSX. Rather than pay to convert BTSX at an exchange and then pay again to convert to fiat and then incur all the fees I listed above regards moving into silver, I'll find it much more worthwhile to go long BitSLV with some of my profit taking even though it will still have BTSX failure risk.

Not that I've actually properly shorted in practice yet, but in theory I should also be able to say short BitUSD with some of my BTSX while going long say BitSLV with another portion and keep the same overall exposure to BTSX at a time like this when I think the chance of BTSX falling a lot from this CAP is low.

Thanks Empirical appreciate your thoughts! The question I was pointing out to was that the guy who sells you bitSLV most likely BTSX bull and not rushing to cover. So when you decide to sell your bitSLV you need another willing buyer or you create downward pressure on bitSLV peg. Also an arbitrageur who might buy off you slightly below the peg will need a willing buyer closer to the peg. So I am just contemplating, if 5-10% yield will attract enough buyers at any time to ensure mkt depth and liquidity, given that there is likely to be strong interest in max shorting bitAssets. Hopefully as BM said there are enough diverse reasons apart from return for investing into bitSLV... or otherwise, at initial stage at least, shorts might need to share more of their profits with the longs...

My understanding is in the new version this won't be a problem as it makes it very attractive to market makers. (The previous version made shorts compete on fees, so market making was not profitable, however the new one makes them compete on collateral.) So there will be many people willing to sell me BitSLV by shorting at 1-1 and then many of those people will be eager to cover if I am willing to sell it at less than 1-1 so that they have the opportunity to short again and compound their returns. (Probably using bots) So I think there will be a lot of liquidity and a tight peg in the new system.

The question is how many people will want like me to buy BitSLV at 1-1 in the beginning and in so doing increase the total amount of BitAssets in circulation. We'll have to see if a lot of collateral and a tight peg is enough to attract demand.

As you mentioned there are another group of people that short but that aren't looking to cover quickly, those are the people that would still be happy to compete on fees and then we could use those fees for yield that could attract more BitAsset demand. So I would like to see that opportunity captured some way.

Offline kisa

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Wrt. diversification I have to disagree as bitAssets don't offer systematic diversification away from BTSX, while BTSX has superior risk/return characteristics...

Yes but there will probably be some profit taking that stays within BTSX. Rather than pay to convert BTSX at an exchange and then pay again to convert to fiat and then incur all the fees I listed above regards moving into silver, I'll find it much more worthwhile to go long BitSLV with some of my profit taking even though it will still have BTSX failure risk.

Not that I've actually properly shorted in practice yet, but in theory I should also be able to say short BitUSD with some of my BTSX while going long say BitSLV with another portion and keep the same overall exposure to BTSX at a time like this when I think the chance of BTSX falling a lot from this CAP is low.

Thanks Empirical appreciate your thoughts! The question I was pointing out to was that the guy who sells you bitSLV most likely BTSX bull and not rushing to cover. So when you decide to sell your bitSLV you need another willing buyer or you create downward pressure on bitSLV peg. Also an arbitrageur who might buy off you slightly below the peg will need a willing buyer closer to the peg. So I am just contemplating, if 5-10% yield will attract enough buyers at any time to ensure mkt depth and liquidity, given that there is likely to be strong interest in max shorting bitAssets. Hopefully as BM said there are enough diverse reasons apart from return for investing into bitSLV... or otherwise, at initial stage at least, shorts might need to share more of their profits with the longs...
« Last Edit: September 25, 2014, 04:40:37 pm by kisa0145 »

Offline alexkravets

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Seems that even assuming zero bugs and a tight peg with huge bid/ask walls and favorable risk/reward trade off as far as systemic risk to BTSX and bitX* assets, there will still be a longish road ahead for BitsharesX

Here's why:

One cannot rule out merchants accepting bit* assets for payment in the long run, but that can only happen if/when the network effects take over, i.e. BitSharesX would need coinbase/circle or equivalents onboard for easyish connections to fiat accounts, etc etc.

I would rather NOT assume network effects in the short and medium term, not least because Bitcoin already "owns" the mindshare.

Instead, having a stable version with a tight and liquid peg and decent yield, overtime might begin a virtuous cycle of non-BTSX fans holding some of their assets in bitUSD or bitSLV which will create more visibility which will create more usage, etc etc ...

This virtuous cycle should be enough to escape kisa0145's conundrum of "why hold bitUSD at <= 10% yield when BTSX has a much much higher yield while having the same systemic risk ?", i.e. credibility should beget credibility.

« Last Edit: September 25, 2014, 03:21:05 pm by alexkravets »

Offline Empirical1.1

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Wrt. diversification I have to disagree as bitAssets don't offer systematic diversification away from BTSX, while BTSX has superior risk/return characteristics...

Yes but there will probably be some profit taking that stays within BTSX. Rather than pay to convert BTSX at an exchange and then pay again to convert to fiat and then incur all the fees I listed above regards moving into silver, I'll find it much more worthwhile to go long BitSLV with some of my profit taking even though it will still have BTSX failure risk.

Not that I've actually properly shorted in practice yet, but in theory I should also be able to say short BitUSD with some of my BTSX while going long say BitSLV with another portion and keep the same overall exposure to BTSX at a time like this when I think the chance of BTSX falling a lot from this CAP is low.

Offline kisa

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Diversification...

Once merchants get on board (working on that) then demand for BitUSD to make purchases will be much higher... once the system is stable for a couple of months or more with a solid BitUSD peg then you can see huge demand for BitUSD..

Once on-ramps and off-ramps get easier and the yield has a solid history... watch out.

Not only watching out, Dan! Holding all my breath and looking forward! :) I would even suggest social consensus of investing 20% into bitAssets for all BTSX investors for the start phase. Yes merchants and payments utility probably the answer. Wrt. diversification I have to disagree as bitAssets don't offer systematic diversification away from BTSX, while BTSX has superior risk/return characteristics...

Not everyone is seeking return... many people want to diversify out of the banks with their purchasing power but don't want it exposed to the full volatility.  Others just want to do business.   

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Offline bytemaster

Diversification...

Once merchants get on board (working on that) then demand for BitUSD to make purchases will be much higher... once the system is stable for a couple of months or more with a solid BitUSD peg then you can see huge demand for BitUSD..

Once on-ramps and off-ramps get easier and the yield has a solid history... watch out.

Not only watching out, Dan! Holding all my breath and looking forward! :) I would even suggest social consensus of investing 20% into bitAssets for all BTSX investors for the start phase. Yes merchants and payments utility probably the answer. Wrt. diversification I have to disagree as bitAssets don't offer systematic diversification away from BTSX, while BTSX has superior risk/return characteristics...

Not everyone is seeking return... many people want to diversify out of the banks with their purchasing power but don't want it exposed to the full volatility.  Others just want to do business.     
For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline kisa

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Diversification...

Once merchants get on board (working on that) then demand for BitUSD to make purchases will be much higher... once the system is stable for a couple of months or more with a solid BitUSD peg then you can see huge demand for BitUSD..

Once on-ramps and off-ramps get easier and the yield has a solid history... watch out.

Not only watching out, Dan! Holding all my breath and looking forward! :) I would even suggest social consensus of investing 20% into bitAssets for all BTSX investors for the start phase. Yes merchants and payments utility probably the answer. Wrt. diversification I have to disagree as bitAssets don't offer systematic diversification away from BTSX, while BTSX has superior risk/return characteristics...