Major improvement in the NuBit to NuShare liquidity ratio


#1

Thanks to @woolly_sammoth, we now have a new data series available for everyone: The NuBit to NuShare liquidity ratio. It provides historical data by graph as well as real time figures.

The recent problems with USNBT value have mostly been due to an unfavorable change in the NuBit to NuShare liquidity ratio. This is the total exchange volume of all types of NuBits (our currencies) divided by the total exchange volume of NuShares. NuShares are used to stabilize the value of NuBits. The capacity of NuShares to support NuBit pricing is in proportion to this ratio. When the ratio is very high, there is little capacity to support NuBIt pricing with NuShares. When the ratio is low, the level of peg support available is strong.

In early 2018, this ratio saw a huge increase, from around 105 to a high of 2692 on April 11 2018. At the time of the peg break on March 20th, the NBT to NSR ratio was around 1500. It continued to rise for an additional three weeks. Since then, the ratio has improved dramatically. Today, it is 132 (using a 30 day period). It is likely the most viable method of restoring USNBT value is the further reduction of this ratio. Historically speaking, the ratio has been much lower, so there is very good reason to think we can return it to its historical range. The reason the ratio became so elevated was that the vast majority of USNBT trading volume was on a single, large exchange that had no listing for NuShares. This created an imbalance in the liquidity of the two assets, dramatically lowering the capacity for NSR sales to support USNBT pricing.

We have taken actions in recent months to improve this ratio, including new NSR exchange listings. Soon the Liquidity Operations team will institute an incentive program for NSR market makers that we expect will result in improvement of the NBT to NSR liquidity ratio. As long as there continues to be interest in NuShares, I expect we can restore the USNBT peg. How fast is dependent on many variables: how well we market NSR and our currencies, how well we can market the parking reward, the price of BTC, etc. The greater the interest in the network, the faster USNBT value can be restored.


Incentive program for NSR market makers
#2

With my suggestion, you don’t have to maintain a high NSR liquidity to support NBT peg, just need to maintain NSR market capitalization higher than NBT’s in circulation.


#3

Good to see you back @Phoenix now that you loaded your bags at favorable prices after dumping everything into the last buyback period!


#4

@Sabreiib can you please remind us where you detailed that suggestion on the forum?


#5


#6

The above analysis is completely wrong. High liquidity of NBT does not harm the peg nor the ecosystem in any way. The problems stem mostly from bad economic policy decisions and possibly excessive skimming of value via excessive pay packages (I don’t know the details enough to say this for sure, but the numbers I’ve seen seem very, very out of line for an operation that at its peak had a market cap of $15 million dollars).

There’s nothing bad about trying to improve the liquidity of NSR though, as long as it doesn’t become another vehicle for skimming.


#7

High NSR liquidity is absolutely welcome, but I suspect it will be never sufficient to support NBT peg via liquidity engine which demands too high NSR liquidity.