I want to start a discussion, which will hopefully will have charactieristics of an analysis on the recent events - BTC/USD surged, ALP, MLP and NuLagoon Tube were emptied on buy side. All that remained to support the peg were gateways.
Here’s the BTCUSD chard from https://bfxdata.com/orderbooks/btcusd
You can see a start of the rise early 2016-05-27. There were several jumps. The trend was upwards until late 2016-05-29.
Here’s what happened to the trade volume and peg of NBT, which was mainly traded in the NBT/BTC pair (like most of the time). You can see a sharp increase of the trade volume that maxed the daily volume on early 2016-05-28:
Early 2016-05-29 the NBTUSD rate received dents after all operations, but the gateway(s) at Poloniex ran out of BTC:
Early on 2016-05-28 I was creating a deposit to @zoro’s and my Poloniex gateway, that got signed and broadcast in record speed to have an increased and redundant last line of defence; before only at @zoro’s gateway were BTC; @Cybnate’s was already emptied on buy side running at a too tight spread.
At 2016-05-28 I was hesitant to sign a deposit to NuLagoon Tube, that was about to bring proceeds from NuSafe to T1.1.
At noon of 2016-05-29 I was sure to have a grasp what’s going on and was arguing for rather funding that gateways, that could support the peg at an increased offset on buyside than sending BTC to NuLagoon Tube.
From then on there was no liquidity provision provided or sponsored by Nu at a tight spread.
You can see that the daily trade volume dropped early 2016-05-29, although BTCUSD still climbed and even made jumps.
And you can see that ever since 2016-09-29 the demarcation point of $0.95 was not really crossed.
That’s the offset, at which @zoro’s gateway is operating.
It creates a barrier of orders that holds the peg above that level as long a buyisde funds remain.
@zoro was following my recommendation when creating an immense offset and even put some percentage points on top, when he realized that he still trades to much BTC.
I gave advice to other gateway operators as well, [sadly to no avail]((Current Liquidity - #1753 by Cybnate).
I configured my NuBot with an offset of 7.5% to create another line of peg support, in case @zoro’s NuBot gets overrun by traders who rather want to lose 5% offset than missing the opportunity to profit from a BTC price jump by 10%.
I’m not sure, whether 7.5% offset is suffficient if the market gets even more crazy, but I’m not keen on making it higher at the moment.
So for now we have a demarcation point at $0.95 and another one at $0.925.
Huge pressure on a side and a high trade volume are indcators to increase the offset for that side - within certain limits for ALP/MLP, without limits I could name for NuOwned operations.
For those who want to have a more comprehensive and linear overview of important events and discussions, read the discussion that followed this post: Current Liquidity - #1708 by masterOfDisaster
Discussiong the situation is highly welcome.
We need to learn from that and try to get stronger through this event.
Last words - less analytic, rather a plea:
Ask youself: would you rather see a weak peg, rather successfully supported during emergencies, even though only a fraction of the regular liquidity is on the gateway accounts or have perfect liquidity for some more minutes and no peg support at all after that, completely relying on traders not making “expensive” trades?
The gateways are risky. They are NuOwned. Nu funds are at stake. But they do what they were made for quite well.
The recent events cost Nu hundreds of thousands of USD in corporate value. I don’t know where we’d be, if we weren’t able to support any peg at all.
A side effect is, that the BTC didn’t get traded for NBT (those are owned by Nu, it’s good for Nu’s books) and are worth 10% more USD than before the gateways had to kick in.