We are now less than 60 days away from Bitcoin block reward halving. Divergence of opinions apart on where the price is going to end up, we all know that extreme volatility and volumes could be seen on all the exchanges.
We have seen in the past year and half of operation of Nu that when there is BTC volatility NBT volume jumps up significantly. This could mean that we might see alternating periods of surging buy and sell pressure and dry reserves.
One weakness in the NBT system during this transition is in ALPs, we cannot rely on them, at least not in this period.
Another huge risk is in the weaknesses of external blockchains NBT uses for operation such as the BTC block size; that could make impossible to transfer funds quickly enough to support liquidity operations.
I would like to see a discussion on how Nu is getting reading for the upcoming BTC block halving and what are the strategies in place to support the peg during this period.
I believe this could be a great opportunity to show how strong are the fundamentals of the Nu system to present and future shareholders and NuBit users.
Indeed! That is why we have the nubot/pybot gateways. The peg can be protected by increasing the nubots’ spreads when needed.
very minor risk. Poloniex (which is currently the only peg breaking exchange)
needs only one confirmation for BTC deposits.
Then when you set the proper fee, the BTC transaction is fast, below 10 mins.
The bigger risk is how fast can FLOT sent the BTC to gateways when needed.
This is exactly what it could happen, extremely high buy pressure when people want to sell all their volatile crypto assets and then Nu could end up holding a significant amount of devaluating assets…?
The ALP there is based on CRFC and should be much more reliable than previous ALP with dutch auction.
Even if ALP at Poloniex fails, there’s still MLP (NuLagoon) and up to 3 Nu funded bot operations (1 NuBot by zoro and 1 PyBot by Cybnate currently being operational, 1 NuBot by me that can be activated on short notice).
I don’t fear for the peg at Poloniex.
If for whatever reason NBT trading volume surges at another exchange, winding up a Nu funded operation there should be possible on short notice as well.
If you fear for delay in deposits you can just ramp up the funding level of the bot operations to increase the buffer - up to what level’s the question, though.
More funds on exchange mean more risk of losing money against those who sucessfully hedge BTC volatility with NBT and an increased expected value of losses by exchange default, theft, etc.
The question is always the same:
how many costs do you want to bear to keep the peg sound?
Or you might view it from a slightly different angle and ask:
what’s more expensive - protecting the peg with [insert amount here] or having a damaged brand image?
We are already in a very good position and just need to pull some strings.
Being aware of what’s going on will be more important in the next weeks than it’s now already.
FLOT will be happy to have a lot of others keeping an eye on the liquidity situation!
That’s the basic problem if you peg a cryptocurrency to fiat, but trade it for other cryptocurrencies at a synthetic peg: volatility of the pegged cryptoasset…
Holding the current park rates (or oscillating or whatever it does) should be sufficient, in my opinion. Some people will panic and sell, some people will panic and buy. Park rates will show that we are a solid and stable investment. Ultimately, however, I think we’ll have some form of park rates until we release BCE.
I think so.
Keeping the park rates above zero is what I have in mind in general and not only in the next months. But that is a different matter and will produce only single digit APR values in my data feed.
For the next months I will very likely keep the APR on double digit values in my data feed.
At the moment they are at
which seems to be good to create short-term demand.
To increase the incentive for parking NBT a bit longer (creating mid-term demand) I might move them to values like
0.0% @ 11.5 days
6% @ 23 days
12% @ 1.5 mo
16% @ 3 mo
8% @ 6 mo
4% @ 12 mo
I haven’t made up my mind. I fear we lack information and knowledge in that field.
I can follow your thinking that longer term parking might be useful to get through that BTC coinbase reward halving.
If it happens like many suppose, although nobody knows, the BTC price might go up.
Maybe in the end it goes up, because all believe it must go up.
I don’t know.
I could give you my detailed analysis on how much the security model of BTC relies on the price per BTC, but that doesn’t help here.
If the BTC price rises, demand for BTC will rise and demand for NBT will decline.
Parking or NSR sale are the only ways to mitigate that.
Having a park rate in place to provide an incentive to park NBT can help a big deal. I have no clue wha park rate you need to provide to get NBT parked.
Who wants to park at an APR of 16% for 3 months, if he can make 50% with a surging BTC price?
The next months will indeed be trying.
Tools like this would help a big deal to assess the situation of parked NBT:
At the moment we only have an RPC (getinfo) to retrieve how many NBT are parked in total, but not for how long:
I tend to agree - at least if enough minting NSR are subscribed to my data feed
Just thinking out of the box to prepare for emergencies re extreme BTC volatility:
Maybe we need to temporarily halt BTC / US-NBT trading in order to protect the peg.
We could withdraw all the liquidity bots and Nu-pool bots. Ideally you would have another trading pair as backup e.g. ETH/USNBT or LTC/USNBT to enable NuBits holder to trade even while BTC/USNBT pair is halted / most liquidity taken away.
The risk is of course that some people would still dump NBT for BTC and say the peg is not held.
But I think wit proper announcements and explanation that the peg is against the US dollar and having alternative pairs to trade on I believe the damage would be limited. The damage of BTC going out of control would be far greater and potentially devastating to NuBits. Are we prepared?
ltc/nbt, eth/nbt, ppc/nbt are not easy to run as we have to find an exchange that has nbt market. So far only ccedk has it. If we can live with nbt/ltc and nbt/eth, we need to find ltc and eth markets.
i mean nbt/usd. I see that hitbtc has btc/usd. So nbt/usd should be possible.We only need to persuade hitbtc to add an exchange of nbt/usd. The real trouble could be AML requiements for depositing usd. But if only selling is supported, no depositing of usd is needed.
No, because it might let me strand with USDT, USD or other fiat I couldn’t withdraw.
Withdrawing USD isn’t possible without meeting AML/KYC requirements - and even if: where to?
There’s no Nu or FLOT bank account where it could ultimately end. And it wouldn’t be good to do it that way even if it were possible. Money on bank accounts can be confiscated just as money (or other funds) on exchanges.
That’s why NuSafe had to be invented to keep a part of the reserves nominated in USD.
I think if it is a doubleside gateway, the fiat fund doesn;t need to be withdrawn. It will be used on the buy side. If there is ever a need to withdraw, change it to BTC (then onward to NBT if needed). This kind of gateway isn’t the minimalistic typws we have. The problem might be that even being able to trade fiat might need to meet KYC/AML requirements.
If it were a pool, the LPs will deal with the AML/KYC issues.