Analysis on BTC/USD, peg, trade volume and gateways

Liquidity
#1

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

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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:

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Early 2016-05-29 the NBTUSD rate received dents after all operations, but the gateway(s) at Poloniex ran out of BTC:

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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.

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Current Liquidity
#2

Interesting analysis. It’s valuable that the peg holds at 0.95. But we are keeping traders of small price fluctuations out with such big spread. I repeat my suggestion on an experiment basis

#3

I do not think you signed the nulagoon replenishment tx.
I think it would make sense that you do because it seems it would be in accordance to your experiment.

#4

Oh, there’s a little trading at Poloniex left, which happens inside the border created by the NuBots:

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I didn’t and I wouldn’t at the moment.
But afair, it used inputs, that were used for the deposit of 15 BTC to each of @zoro’s and my gateway, so it wouldn’t work even if I signed it.
If you create a tx that deposits, say 5 BTC to NuLagoon Tube, I will likely sign it - if only to see how long it lasts.
I don’t think I’d sign a deposit of more BTC there. Not now.

FLOT BTC Operations (buy side)
#5

I think there might be more if we put e.g. 5-10k at close spread. I see Tether has more high frequent traders. Maybe we should get some of them if only for PR and liquidity they bring.

#6

Our reserve is down to 31 BTC and we haven’t sold a single NSR.
Do you really want to do that now?

#7

You didn’t get the point. I was suggesting let the trader trade among themselves by providing sell side liquidity only but close spread on both buy and sell side. There is 0 buy side from Nu so Nu has nothing to lose. Traders, after discovering if they buy nbt the btc they had paid will show up with a small spread on the buy side, could decide to take advantage by trading back and forth when there is even small price ripples.

#8

Could any of you guys dumb it down a little for a mainstream user like me? Basically what is going on and what should I do with my Nubits? Thanks! I see that there is little buy orders and more sell orders, basic economics, price goes down… However, is there any reserves or anything to get the price back to $1.00 apart from selling Nushares for BTC —> USNBT, burning, liquidty pools etc? What should I do? I also have Nushares.

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#9

Obviously. Thank you for elaborating!
What you suggest makes sense and already happens as it seems.

BTC price surged, beginning 2016-05-27.
The demand for BTC made Nu’s reserves run low.

At the moment an NSR sale is being conducted to bring additional BTC to the reserve.

Until the BTC reserve could be increased (through NSR sale, dropping BTC price), there can only be liquidity at an increased offset provided.

If you are in a hurry to trade your NBT for BTC, you will have to pay an uplift.
If you have some time, I suggest you wait, until it’s easier or trade the small pieces that can be found at a tighter spread even right now.

There are still 30 BTC on reserve and approximately 40 BTC in gateways at Poloniex providing liquidity at an increased offset.

I’m sorry for the inconvenience.
Looking at the change of BTC rate, you might agree that this was an extraordinary event.

#10

You can sell your nubits if you accept 5% spread. I tell you what I do: I planned to use my nubits to buy things but there is not many places for it yet. (I don;t have an android phone to run the NuDroid wallet) In the mean time I keep my nubits as a stable value store to trade/speculate cryptos as a hobby and to invest in a non-serious way. I parked some of the nubits which I don’t plan to use. I also use them as an LP. The reward has been very good.

Everyone is watching the btc show. When there are signs of btc price falling, you will see buy orders in the 10ks.

There is process that is backed by about $160k (T4 reserve when btc price started to go up, minus buyback costs thereafter) that will buy people’s btc at $1/nbt and guaranteed to buy back, WITHOUT selling nushares. So $1.00 will come back and last within the $160k boundary, even Nu doesn’t sell shares. Nu is like a stablizer working within a limit.

Besides the usual “don’t invest more than you could afford to lose in one asset”, I say keep them for upward potential and being able to vote.

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