One possible reason why there are only a few LPC custodians right now is

the risk of loss when BTC goes down.
I am hesitating about becoming a LPC on NBT/BTC because I have not yet devised a strategy for hedging.
I am aware of the possibility of buying put options on Okcoins for example like mentioned here but that makes the process too complicated for me at this stage or more time consuming that my time allows right now.
I do not reject the idea of hedging of course but that would need some study.

That is why I would like to ask professional traders from the community the following:

Do you think being a custodian is a profitable business right now and if the answer is yes why aren’t you a custodian right now?
If the answer is no what is needed to make the activity of providing liquidity a profitable business?

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you touched a very important point.

Right now there is (only) one way to make it 100% profitable : being a fiat custodian . EUR, PHP, CNY, and even better USD. You can make your risk analysis, and ask for a fee if you think that the fiat your holding will swing.

You can do the same kind of reasoning with BTC, but its huge volatility and mid-term unpredictability makes it look like you are betting. And not everybody is fond betting large sums.

As I type we are discussing AI-level changes required to the bot that will make it at least less-risky, and maybe also profitable if done correctly (enlarging spreads dynamically and reducing/augmenting wall size).


From a traders perspective one can consider the business of market-making. In a sense custodians are market-makers in a specific market relating to Nu. Nu as a system ought to turn a profit, but that is not the same as custodians earning large profits without risk (that is not a claim anyway). Custodians and Nu shareholders take risk, and if things work out, they earn a profit as compensation.

One thing to consider is that any Profit-and-loss (PnL) is subject to variance. For example a typical trading operation might be profitable, but have a risk attached to it. Even if market-making is profitable, it will have risk. That is true, independent of how Nu operates. However, in traditional markets it used to be the case that MM’s could acquire licenses which in effect where the license to make money without risk. So a MM on the New York stock exchange had a very stable and profitable income stream. Nowadays these are mostly algo traders (“High frequency”).

Profitability of a trading strategy is not just a question of whether it earns say 10%p.a., it is question exactly what the ROI is, and what the risk is. There is a lot things which can go into the evaluation of a trading strategy.


As JL touched on, Nu needs to create a market for LPCs as BTC created a market for miners with competition, risk, ROI, profitability involved, that can be assessed precisely…
I fee the success of Nu will depend on the size of that market…