Because of the wild fluctuations of the price of bitcoin custodians risk having the value of their buy side liquidity mauled by bitcoin’s bear market.
Here’s what could be done to reduce exposure to this risk. The trading bot should keep only a small fraction of the bitcoins on the exchange at a time. As the buy wall gets eaten, the bot should automatically buy bitcoins for USD at bitstamp and send those bitcoins to the altcoin exchange. What say you?
Where does the USD used to buy on the downturn come from? If custodians/liquidity pools have “spare” liquidity denominated in USD would it not be better just to put that into a NBT/USD market?
I like the idea, but it may be more complex than needed.
My opinion is that officially supported* NBT/crypto markets should be phased out in favor of NBT/fiat markets. Better to let them emerge organically, funded with day traders’ BTC and NBT.
* by custodians working at the behest of Nu shareholders