It is worth noting how dramatically well liquidity costs scale as part of this discussion. Right now we are offering 133,000 in liquidity on a money supply of about 750,000. This means 18% of the entire money supply is sitting on order books ready for immediate exchange.
This high percentage is a consequence of a very small scale. Consider the currency that has scaled the most, the US dollar. I don’t have figures, but I think we could agree the percent of US dollars sitting on currency exchanges is extremely small when compared with our 18%. I will speculate that it is lower than 0.1% of US dollar money supply, and probably much lower than that. Neither the Federal Reserve nor the US government pay for liquidity. Because they have scale.
To get scale we need liquidity. As we develop scale, liquidity costs as a percentage of the money supply will drop dramatically. It may be that a 10 fold increase in money supply only requires a two or three fold increase in liquidity. Reducing liquidity by increasing spreads only lowers our scale and increases the percentage of the money required for liquidity provision. It is really critical shareholders understand this. I will repeat my assessment that poor liquidity, or a lack of understanding of the importance of it in developing our market share, is the greatest threat to the NuBit project right now.
I think the only time I made a more desperate plea to shareholders was in January 2015 when I warned about the dangers of counterparty risk introduced by using shareholder funds for liquidity. Less than a month later, our progress was slowed a great deal by multiple exchange defaults. My focus was exactly in the right place then, and I am equally confident that my focus on liquidity now is appropriate.