It seems traders are also using nubits to hedge against positive btc volatility

cryptog 2015-01-26 15:10:15 UTC #1

Nu has got $ 1,445,460 of trade volume on CMC over the last 24 within a bullish btc environment.
I was surprised at the beginning but when you think about it, traders need constantly to exit their position locally even in a BTC uptrend so that is natural for them to use nubits.
So Nubits is useful what ever the direction of BTC is.

[Passed] Motion to Make the Nu Source Code Available

Ben 2015-01-26 16:32:29 UTC #2

Alternatively, it could also be that people are trading NBT not as a hedge, but as a speculative instrument by scalping differences in buy/sell pricing as the exchange rate of BTC exhibits wild swings.

cryptog 2015-01-26 17:24:21 UTC #3

Could you give an example? I am not sure if I understand well what you mean.

Ben 2015-01-26 17:49:02 UTC #4

I should have rephrased it – these traders are still using NBT as a hedge, but rather than using their BTC as collateral on other markets they are only trading within the exchange’s NBT/BTC market. A simple example:

You can buy 100 BTC worth of NBT for 274.8189 NBT/BTC expecting that the price of BTC will drop in the next hour. That 100 BTC can be traded for 27,481.8894 NBT.

Presume you are wrong and the price of BTC goes up by 3%, to 283.0637 NBT/BTC. The NuBot on the market you are trading on has (your previously owned) BTC in buy orders priced at 282.02 NBT/BTC. If you sold back the 27,481.8894 NBT you previously would receive ~97 BTC.

But if you are right, and the price does drop by 3%, to 266.5743 NBT/BTC, you’d be able to trade your NBT back in at the “buy” price of 265.9000 NBT/BTC and receive ~103 BTC.

pennybreaker 2015-01-26 20:43:40 UTC #5

I believe that “hedging” is a much more accurate description of what we see happening with NSR, and we can clearly see that happening by observing the 4 hr charts of NSR/BTC and BTC/CNY, on Bter:

NBT/BTC is simply a currency trading pair, of which one of it’s uses is potentially for hedging.

mhps 2015-01-27 01:02:14 UTC #6

For hedging Nubits doesn’t have to have a strict $1 price. It only needs to be clearly less volatile than other coins. A “soft” peg (say to $0.8 - $1.2) is still highly useful (and could bring lower risks to the custodian).

cryptog 2015-01-27 09:53:26 UTC #7

Right. I see what you mean. Tks for the clarification. You can indeed make money by just trading in and out of NBT/BTC because of the huge relative liquidity at the top of the order book produced by the current design of NuBot (no parametrization or mirroring yet)

Assuming that 283.0637 is the middle rate between the buy and sell side, shouldn’t 282.02 be at the sell side and something like 284 at the buy side of NBT/BTC?

cryptog 2015-01-27 10:13:47 UTC #8

I second your view.
It is the second time that I see a situation in which all crypto assets (all follow bitcoin) are down except NuShares.

Bitcoin Bitcoin $ 3,554,872,119 $ 258.22 13,766,675 BTC $ 70,619,600 -14.64 %
14 NuShares NuShares $ 5,630,327 $ 0.009262 607,910,454 NSR * $ 8,863 3.73 %

And then when bitcoin is up (and all other following crypto assets), NuShares is down.

If that pattern persists, it is of high interest.
We could see a real dichotomy, a real uncoupling between bitcoin and Nushares for the whole crypto market.
And this is natural: NuShares are the shares of Nu whose job is to maintain a stable crypto currency, which is very useful when bitcoin goes down.
People are not that bothered when bitcoin goes up.