Current Liquidity

masterOfDisaster · May 31, 2016, 8:57am

Then I suggest you join FLOT and operate gateways that you try to keep balanced or even funded on each side at a closer spread.
It’s indeed positive as we do the best we can considering the circumstances.
The peg didn’t fail completely. It’s just on degraded quality.

You can sell at an uplift of 5% now.

We are in fact within a 5.5% spread, because the offset is 5% on buyside and 0.5% on sellside.
Do you have a suggestion to improve the liquidity situation without risking the peg we still keep?
Keeping the peg was only on that level was only possible, because we increased the buyside offset.

To revive the liquidity provision it would make sense to close the spread with ALP, by letting them start liquidity provision at a buyside offset of say 3% and letting them tighten the offset until the trade volume is on the level you want to have while still being able to support both sides.
Jumping in at 0.5% offset is not the best idea. Testing the waters, reducing the offset in steps would be a way to recover.

cryptog · May 31, 2016, 9:21am

Some people are ready to buy even at large spreads…[quote=“masterOfDisaster, post:1788, topic:1239”]
Btw. - the spread of my operation is roughly 8%, asymmetrically divided in 7.5% buyside and 0.5% sellside.
[/quote]

I am very curious to know empirically about the minimum spread that makes gateways self-funding possible, meaning that we would not need to use the funds of Nu at gateways while at the same time pay the operators fees.

In other words, what spreads can counterbalance purely the cost (risk of exchange default)?

Sabreiib · May 31, 2016, 9:33am

The cost also depends on pair volatility, on same exchange, the NBT/USD liquidity cost is lower than NBT/BTC.

cryptog · May 31, 2016, 9:45am

I am talking about nbt/btc.

masterOfDisaster · May 31, 2016, 9:45am

This spread will depend on a lot of factors like exchange default risk, BTC volatility, etc.
Market awareness is necessary to adjust the spread properly.
At the moment we do that based on guesses and experience - quite well, if you ask me.

Under normal circumstances you won’t have trades at a spread, which can compensate the costs, because ALP cuts you off your trades.
This is only working during emergencies, or if you allow a big spread for ALP.
Most won’t find that desirable. I think it should be discussed nevertheless.

The bigger the spread, the more gain from trades, but the less number of trades you make.
Each market condition will have a sweet spot, which maximizes the revenue per time frame by having a maximum of
tradevolume * revenue per trade.
Finding that optimum is the challenge.

mhps · May 31, 2016, 10:27am

You can still buy USD at CCEDK with 1% spread after fee. In fact I just see $4,300 USD available. You might have to withdraw USD (for example to buy BTC elsewhere), but at least the spread is low.

Don’t you wish we had deep liquidity on NBT/USD if only for risk mitigation purposes in situations like now? We used to have like $7,000 on each side until the target and reward were slashed. NBT/USD liquidity is foundamental in Nu’s system.

masterOfDisaster · May 31, 2016, 10:33am

This puts the situation in a nutshell.
All trouble we currently have to face originates from a synthetic peg.

crypto_coiner · May 31, 2016, 10:44am

I d love to have this in a BCex

masterOfDisaster · May 31, 2016, 12:14pm

Water level of the Poloniex gateways:

Tue May 31 12:12:36 UTC 2016
status of mOD dual side NuBot at Poloniex:
nud getliquidityinfo B | grep B9gXptkoqAApF3AFrQyhUbhSzvuEudxupt -A 2
        "B9gXptkoqAApF3AFrQyhUbhSzvuEudxupt" : {
            "buy" : 12289.49,
            "sell" : 20161.9209
status of zoro dual side NuBot at Poloniex:
nud getliquidityinfo B | grep BJs4YbtaqCmxeHLiR6zzjnZEotYVFAPfMo -A 2
        "BJs4YbtaqCmxeHLiR6zzjnZEotYVFAPfMo" : {
            "buy" : 9623.81,
            "sell" : 21278.2562

mhps · May 31, 2016, 12:20pm

When to lower the spread? Is there a formula?

masterOfDisaster · May 31, 2016, 12:32pm

I have no clever answer for doing that on the gateways, but my gut says:
not before we started selling (significant amounts of) NBT - if ever.
After all the gateway are currently not meant as being regular support of liquidity provision (although I made a proposal for doing that).
They are emergency solutions.

As soon as trading starts to go in both directions (BTC dropping or fluctuating), ALP will pick up activity and offer funds at a tight spread.

If that doesn’t happen automatically (BTC rather stable or rising even more), we should try to revive it with ALP operated at an increased spread, that gets tightened until trading picks up.

mhps · May 31, 2016, 1:45pm

Maybe we should work toward a coherent market-aware spread strategy for all types of T1 walls.

liquidity aware examples:

spread increases as wall decreases follow a inverse propportion function: if the wall decreases to 1/3 of starting amount, the spread increases to 3 times of starting spread

spread = constant / wall_height

spread increases as wall decreases follow a exponential function: if the wall decreases to 1/2 of starting amount, the spread increases to 2 times the current value

spread = constant * 2 ^ (wall_height / starting_height)

Volatility aware spread

spread = constant * RMS(last N samples)

masterOfDisaster · May 31, 2016, 3:08pm

Creating market awareness is important to allow economic operation of liquidity provision.
It’s good to start working on a mathematical model.

I know already that market awareness will provoke opposition, but I’m damn sure that liquidity provision doesn’t work reliably without it (we see it at the moment):

you either run out of funds trying to support liquidity provision with high volume at a tight spread not caring about environmental parameters
or you run out of liquidity provision at all

What we can derive from the current emergency situation and the gateways at a high buyside offset is:

even at 5% offset trades happen
quite some trades happen with orders that aren’t provided by the gateways - this could be
regular traders
ALP funds

In fact there’s a kind of market awareness, albeit not as a formula, that made the offset of the gateways that big:
the BTC bull market created an immense demand for BTC. The supply of BTC in Nu reserve is limited and so the price had to increase.
As long as there’s no sign of the bull market being over, there’s no reason to reduce the offset. Doing it would just empty the reserves, leaving totally no peg support left.
The fate of the peg would be in the hands of traders.
That doesn’t sound much like a pegged currency.

A buyside peg to $0.95 is better than no peg!
The sellside is pegged to $1.005 btw.

If the spread would be adjusted by formulas like those proposed by @mhps, the trade volume would suffer from it.
We see less trade volume at Poloniex now for several reasons.
One is that BTC is less volatile and not surging (or nosediving) at the moment. Another one is the offset.
With market awareness, spreads would increase (and decrease) as a function of traded volume, volatility or other parameters.
Seeing less trade volume doesn’t sound attractive.
Having a much more reliable and even cheaper liquidity provision is the benefit of it.

With properly adjusted market aware parameters, there would be no need for gateways (I’d like to keep them as backup - just in case…).
But that means, that depending on the situation, even ALP need to operate far outside 1% spread.
And why not?

If you can’t guarantee a small spread for as long as you wish (forever?), it’s better to increase the spread, if that helps you sustaining liquidity provision at all.

masterOfDisaster · May 31, 2016, 5:53pm

###2016-05-31 - peg according to CMC

Poloniex NuBot gateway status

Tue May 31 17:47:51 UTC 2016
status of mOD dual side NuBot at Poloniex:
nud getliquidityinfo B | grep B9gXptkoqAApF3AFrQyhUbhSzvuEudxupt -A 2
        "B9gXptkoqAApF3AFrQyhUbhSzvuEudxupt" : {
            "buy" : 11992.13,
            "sell" : 20161.9209
status of zoro dual side NuBot at Poloniex:
nud getliquidityinfo B | grep BJs4YbtaqCmxeHLiR6zzjnZEotYVFAPfMo -A 2
        "BJs4YbtaqCmxeHLiR6zzjnZEotYVFAPfMo" : {
            "buy" : 9376.08,
            "sell" : 21278.2562

Liquidity according to ALiX

jooize · June 1, 2016, 2:21am

When is the peg considered lost? At no liquidity or at a certain spread?

Do we currently have any liquidity at tight spread?

@JordanLee said high spread is a suicidal tendency. What other measures can be taken? How much liquidity can we provide at a tight spread right now, soon, and later?

crypto_coiner · June 1, 2016, 2:41am

Good questions –
Let’s redefine our peg –
The peg definition is the premise to all Nu’s business and profit avenues

cryptog · June 1, 2016, 8:24am

reported buy side liquidity at 3%.

masterOfDisaster · June 1, 2016, 8:50am

Only if you look at a tight spread, which is not appropriate for the current emergency situation.

If you include buyside orders at an increased offset:

Wed Jun  1 08:44:24 UTC 2016
status of mOD dual side NuBot at Poloniex:
nud getliquidityinfo B | grep B9gXptkoqAApF3AFrQyhUbhSzvuEudxupt -A 2
        "B9gXptkoqAApF3AFrQyhUbhSzvuEudxupt" : {
            "buy" : 11966.36,
            "sell" : 20161.9209
status of zoro dual side NuBot at Poloniex:
nud getliquidityinfo B | grep BJs4YbtaqCmxeHLiR6zzjnZEotYVFAPfMo -A 2
        "BJs4YbtaqCmxeHLiR6zzjnZEotYVFAPfMo" : {
            "buy" : 11042.62,
            "sell" : 19665.5832

you’ll find $23,000 buyside liquidity.
If you add that to the buyside and relate that to the 123,000 NBT on sellside:

you are at close to 20% (23,000 / (123,000+23,000+4,000)).
Not that bad at all.
Only possible due to increased offsets!

cryptog · June 1, 2016, 1:42pm

0.47 % buy side liquidity at tight peg now, only!

nmei · June 1, 2016, 2:03pm

Is there BTC anywhere???

Apparently my CCEDK LP is down for fiat too…that alp software requires 2X daily monitoring - to restart because of errors.