Liquidity provider profitability experiment

[henry]

Thank you. It would be interesting to see the result of this.

[muchogusto]

Here are some early results after only 48 hours:

Simple NAV: 20,175, a 0.87% profit

Bitcoin Price Adjusted NAV: with current price of 426.35, the adjustment is -109, so 20,066, a 0.33% profit

Bitcoin Price Adjusted With Pool Payments NAV: NuPool rewards total 18, so 20,084, a 0.42% profit. Annualised and compounded rate of return is 115%.

[huafei]

cool, can you show out the BTC balance and NBT balance?

[masterOfDisaster]

Might I ask whether your BTC balance went up in those 48 hours?

[cryptog]

are you expecting btc/usd to be stable for the whole month?

[muchogusto]

cool, can you show out the BTC balance and NBT balance?

I will going forward. Thanks for the request.[quote=“masterOfDisaster, post:8, topic:3770, full:true”]
Might I ask whether your BTC balance went up in those 48 hours?
[/quote]

It did, up to about $15,000 as I remember.

are you expecting btc/usd to be stable for the whole month?

Not sure I understand the meaning behind this question, but I do detect a little sarcasm. Two of the NAVs reported are adjusted for changes in Bitcoin price.

Finally, sorry my NuBot program is down right now. My server rebooted unexpectedly and I can’t seem to get it going again. Have asked woolly_sammoth for help.

[muchogusto]

sorry my NuBot program is down right now

I got it up and running again.

[Nagalim]

I think cryptog is asking about how you will normalize out any long term bitcoin trends over the course of the experiment. I think you’ve already done that with your NAVs. I don’t think it was meant to be facetious.

[cryptog]

Two of the NAVs reported are adjusted for changes in Bitcoin price.

Sorry for being unclear. This is what I wanted to know.
And no, i am not sarcastic.

[Financisto]

This experiment seems to be interesting in the mid/long run, I’ll be following this…

[muchogusto]

Latest results:

NBT Balance: 20,188
BTC Balance: 0.000145

Simple NAV: 20,188, a 0.94% profit

Bitcoin Price Adjusted NAV: with current price of 427.69, the adjustment is -141, so 20,048, a 0.24% profit

Bitcoin Price Adjusted With Pool Payments NAV: NuPool rewards total 72, so 20,120, a 0.60% profit. Annualised and compounded rate of return is 40%.

[muchogusto]

Results as of 25/04/2016:

NBT Balance: 11,691
BTC Balance: 18.37

Simple NAV: 20,219, a 1.01% profit

Bitcoin Price Adjusted NAV: with current price of 464.22, the adjustment is -1011, so 19,208, a 3.96% loss

Bitcoin Price Adjusted With Pool Payments NAV: NuPool rewards total 124, so 19,332, a 3.34% loss. Annualised and compounded rate of loss is 60%.

Notes: Very little trading has gone on, though trading did bring a small profit. Most profit has come from NuPool compensation. The account was all in NuBits for most of the last week when Bitcoin rose fast. While the simple NAV is up the Bitcoin price adjusted calculations indicate a loss when compared to simply holding NuBits and Bitcoin in equal quantities.

[zoro]

You were unlucky to perform the experiment in a bullish BTC period!

[masterOfDisaster]

In a bearish period @muchogusto might be as unlucky as now - then he’d sit on BTC in times of dwindling BTC rates…

After all that’s what we expect from this experiment:
a liquidity provider bears the risk of a partial loss, because the funds are used from traders hedging BTC volatility and furthermore takes the risk of a total loss by exchange defaults/thefts.

Let’s see whether this experiment can meet the expectations with regard to volatility.
We can learn from it how high the offset must be to compensate the loss from volatility/hedging.
While this will not be true for all situations, it’s better than the guesstimates we have now.

Thank you, @muchogusto for doing this!

[crypto_coiner]

After all that’s what we expect from this experiment:a liquidity provider bears the risk of a partial loss, because the funds are used from traders hedging BTC volatility and furthermore takes the risk of a total loss by exchange defaults/thefts.

So, the LPC cannot make money unless supported by a grant, justified by a perpetual NBT market demand

[masterOfDisaster]

No.

We can learn from it how high the offset must be to compensate the loss from volatility/hedging.

If you add the costs from exchange defaults/thefts to the spread, you can operate at break even or make a again if the offset is even higher.

[muchogusto]

Results as of 06/05/2016:

NBT Balance: 0
BTC Balance: 45.16

Simple NAV: 20,546, a 2.73% profit

Bitcoin Price Adjusted NAV: with current price of 454.98, the adjustment is -791, so 19,755, a 1.23% loss

Bitcoin Price Adjusted With Pool Payments NAV: NuPool rewards total 219, so 19,974, a 0.13% loss. Annualised and compounded rate of loss is 1.9%.

[muchogusto]

Results as of 08/05/2016:

NBT Balance: 14,764
BTC Balance: 13.01

Simple NAV: 20,737, a 3.68% profit

Bitcoin Price Adjusted NAV: with current price of 459.09, the adjustment is -888, so 19,848, a 0.76% loss

Bitcoin Price Adjusted With Pool Payments NAV: NuPool rewards total 240, so 20,088, a 0.44% gain. Annualised and compounded rate of gain is 3.3%.

[muchogusto]

Results as of 15/05/2016:

NBT Balance: 19,929
BTC Balance: 1.21

Simple NAV: 20,484, a 2.42% profit

Bitcoin Price Adjusted NAV: with current price of 459.01, the adjustment is -887, so 19,598, a 2.01% loss

Bitcoin Price Adjusted With Pool Payments NAV: NuPool rewards total 406, so 20,004, a 0.02% gain. Annualised and compounded rate of gain is 0.2%.

[muchogusto]

In the way of changes being made to liquidity quality by Jordan Lee and NuLagoon, I would like to put my own offer on the table.

I will change the experiment from the current 1% spread to a 0.5% spread if shareholders will commit to pay 2,000 NBT for 60 days of liquidity after it has been provided with 95% or more uptime.

Without some type of additional compensation or much improved results, I will probably end the experiment in a few weeks and exit liquidity provision.

Please say if you would vote for such a motion and if you prefer the spread, amount of liquidity or some other aspect changed. It might also make sense to give the extra funds to NuPool and have myself and other pool participants compete for them.

Bottom line is I am not afraid of a tight spread and want to do my part to help, but I probably won’t continue long with the current level of compensation.