[SURVEY] Liquidity Custodianship Business - Profitable or Not Profitable

[crypto_coiner]

I am interested in being a liquidity provider, but intuitively I believe this is a loosing business.
Traders are just eating your walls to hedge their positions, at your expense.

I would like to ask for every individual who experimented to be a Liquidity Provider the following:

• Time period during which liquidity was provided
• Currency Pair
• Amount provided
• Side: Sell or Buy
• Net Loss or Gain

Thank you.

edit: typos

[cryptog]

Without a hedge in a time of downtrend for btc price, it is likely to be a losing business, I feel.
I was a liquidity provider on NBT/USD for 1 month (3 weeks because of the hack) on CCEDK, 5000 usd in dual mode.
NBT has no volatility against USD.
So no loss on the fund value. It is obviously profitable to be a custodian on NBT/USD because the only risk is the risk of hack.

However, on NBT/BTC…I am using the trustless liquidity pool of creon on bitttex.
50 NBT in dual mode.
With the 5% decrease of BTC/USD over the last 24h, I already lost 5% because someone hedged against me and I do not have any hedge.
If that downtrend continues, it is likely that I would lose even more.
In this situation, the 7% or so of interest is not enough since it is a monthly interest.
If BTC/USD goes back again, I may balance out the loss and end up with no loss in terms of fund value.
So with the interest, it might be profitable.
That is why I am willing to try the pool for a while but with a small fund, relatively.

Besides, I feel hedging is crucial if you wanna devise a strategy for a profitable operation but so far it seems it is complicated to do so, at least to me.
Please refer to [NuPool] Announcing: Trustless liquidity pool operation “NuPool” on Bittrex.com has started for more details and Possible solution to custodian loss of value due to BTC exposure

A possible scenario that I envision is that BTC/USD continues that downtrend till getting stable at a specific price (say 100 USD).
That cause losses for custodians but the world realize that BTC is not a good currency (finally!) and realize that NuBit is good at being a currency (assuming that the peg is kept in between which I believe it would ).
Then the main exchanges adopt NBT/USD and we shift entirely to a liquidity provided on FIAT markets, where it is much easier to be profitable, as a custodian.

In other words, that loss potentially incurred by custodians on NBT/BTC (that are likely to be Nu shareholders) could be regarded as a required transition for getting Nu to the next level.

Of course, I am not saying that being a liquidity provider on NBT/BTC offers no way to be profitable.
I am just saying that it is difficult, at least from my perspective.
That difficulty could explain why Nu has been having so few LPCs so far since the release.

I hope pools would change that in a way or another.

[mhps]

I think Nu has better find a business model other than supporting exchanges (feeding unthankful speculators). Before that happens, custodians should stay mostly in NBT/USD.

I come to realize of the importance of Benjamin’s insight

[Closed] Motion to cease shareholder-funded NBT/PPC operations

It's worth nothing that withdrawing custodial support from NBT/PPC and NBT/BTC will force volume to move to NBT/USD. Say there is only custodial support for NBT/USD If you want to purchase NBT, then you will get hit with a bid/ask spread if you purchase NBT directly using BTC or PPC. You can minimize this slippage by first converting BTC to USD and then converting USD to NBT. This will lead volume to shift from NBT/PPC,NBT/BTC to NBT/USD. tl;dr; You cannot wait for volume in the NBT/USD mark…

tl;dr; You cannot wait for volume in the NBT/USD market to develop before withdrawing custodial support. If you don’t withdraw support from NBT/PPC and NBT/BTC, then the NBT/USD market will never develop (or at least not for a very long time).

NBT/BTC offers little help to real economy that wants to use a dollar-pegged cryptocurrency. It helps to take volume away from NBT/USD.

We all hope BTC/USD will bottom out and custodians (and shareholders) will stop losing money. But in fact when BTC starts to rise speculators will dump Nubits. We are playing a losing game by catoring to speculative needs. We should concentrate on making it very easy for normal people to buy Nubits with fiat, and help to flood the market with lots of such low risk (low risk to Nu) Nubits so that walls of NBT/BTC at exchanges are a natural result from speculation.

[cryptog]

I cannot agree more with you on that.
That is why I am working with a very small fund like 50NBT because I know I am likely to lose money.

I agree. NBT/FIAT pairs should be the pairs Nu offers liquidity on, in particular NBT/USD.

But if we stop NBT/BTC, we would have very low liquidity since the only exchange that accepts NBT/USD is currently ccedk.

It’s worth nothing that withdrawing custodial support from NBT/PPC and NBT/BTC will force volume to move to NBT/USD.

I feel the above-mentioned remark is key.

[crypto_coiner]

I could not agree more with @mhps, @cryptog and @Benjamin based/on the following quotes:

I agree. NBT/FIAT pairs should be the pairs Nu offers liquidity on, in particular NBT/USD.

NBT/BTC offers little help to real economy that wants to use a dollar-pegged cryptocurrency. It helps to take volume away from NBT/USD.

I think Nu has better find a business model other than supporting exchanges (feeding unthankful speculators). Before that happens, custodians should stay mostly in NBT/USD.

With the 5% decrease of BTC/USD over the last 24h, I already lost 5% because someone hedged against me and I do not have any hedge.If that downtrend continues, it is likely that I would lose even more.

That concur also with my yesterday’s call: NBT: From a Hedging Currency to a Transactional Currency

[mhps]

But if we stop NBT/BTC, we would have very low liquidity since the only exchange that accepts NBT/USD is currently ccedk.

That is because NBT/USD doesn’t fluctuate therefore there is no money to be made for cryproexchanges. We should not limit ourselves to selling/buying NBT on cryptoexchanges. There are many times more payment processors, currecy exchangers, and payment gateways than there are cryptoexchanges. What’s more, people can sell/buy on individual level if Nu can provide reference code for their webpages.

[crypto_coiner]

That is because NBT/USD doesn’t fluctuate therefore there is no money to be made for cryproexchanges. We should not limit ourselves to selling/buying NBT on cryptoexchanges. There are many times more payment processors, currecy exchangers, and payment gateways than there are cryptoexchanges

What would be the primary fields/interface where Nu would establish or control its peg - Exchange? gateways? processors?

On the topic of exchanges

From the API document ( mostly the python example ) it does seem straight forward to setup a server to sell NuBits from an open wallet after receiving clients’ PM-USD (to be stored off the server in a PM account), and vice versa. The result would be like this or this, except with NuBits it gets rather easy because there is no need to get a price feed and do conversion.

That seems promising

[cryptog]

That is because NBT/USD doesn’t fluctuate therefore there is no money to be made for cryproexchanges

Very good point.

Besides, can we envision a peg only maintained by providing liquidity into payment processors?
I feel it is possible if we can incentivize sufficiently custodians to sell and buy NuBits around the peg.
But in that case, how would that change from exchanges?
Maybe the opportunities for traders to hedge against custodians would much more limited in payment processors rather than exchanges.
I am just making some hypotheses here though.

EDIT: added info
EDIT2: how would that change from exchanges? --> well the pairs involved would be NBT/FIAT
So traders would not be able to hedge against custodians, hence the absence of loss.

[mhps]

What would be the primary fields/interface where Nu would establish or control its peg - Exchange? gateways? processors?

Payment processors such as OKPay could support Nubits directly, just as it is supporting bitcoin, litecoin, and dogecoin now.

But that is not the best part, because such support is centralized. The better part is PerfectMoney, OKPay, Webmoney, Payeer, EgoPay etc all have APIs. If someone can provide simple code, business and grassroot individuals can easily become nubits liquidity providers, without anyone’s approval or interference, selling/buying NBT/USD, using these payment processors as backends so all fiats are off the server.

[cryptog]

So instead of offering liquidity only on exchanges for NBT/BTC 1) (I remember a while ago that Jordan Lee stated that he wanted to make NuBit the most liquid crypto over exchanges), why not offering offering liquidity only on payment processors for NBT/FIAT 2) ?
In case 1), NuBit is only a stable coin against which traders hedge their BTC positions with no utility in real life.
In case 2), NuBits is a stable coin with no utility for speculating or trading or hedging in crypto exchanges, but with utility in real life (I am extrapolating by imagining that consumers would buy NuBits for online payment.)

I feel 2) is much closer to the original idea of NuBits.
Right now, I think it s fair to say that NuBits is not fulfilling the original idea: transactional currency.
This post mentions the same state of affairs.

I feel we need to operate a shift from 1) to 2) and then NuBits would fulfill the original goal.
If we do not do it, some fork of Nu would do it…

[crypto_coiner]

I second absolutely this reply - this is well stated
What are we waiting for? somebody propose a motion and/or grant!

[crypto_coiner]

This tweet shows that NBT is used as a hedging instrument, away from its objective of a transactional currency.

So if I think $BTC will tank I should buy $NBT, if I think $BTC will rise I should sell $NBT.

ant (ThisIsNuse)

[mhps]

What are we waiting for?

It takes time for ideas to sink in. Let’s spread the idea and get discussion going.

[Nagalim]

Can we get the NuPool on CCEDK NBT/USD? We just need a pool operator to propose a motion right? Who wants to be pool operator? I’d do it, but I’m afraid I don’t have the technical skills, commitable time, or trust of the community.

[Nagalim]

Thinking about it more, pegging NBT/USD on CCEDK is just pegging Swift and Payeer as payment processors. Still, this is far better than pegging nbt/btc in my opinion.

[creon]

I tried this pair already and it is fully supported by the pool and working (alongside with EUR).

If anyone is interested in setting up a TLLP, be assured that you will get my full support in installing and maintaining it. Of course some technical skills are required.

Pegging against fiat was always the original goal and as far as I remember the whole crypto pegging was done because there were no other options. With open source we absolutely should evaluate our new options closely. @woolly_sammoth’s grant on Bittylicious is already a good start.

[Nagalim]

So I would be happy to put up something like 50USD on the NBT/USD using a btc-e code to get the USD to ccedk if I can get paid .25%/day. Can I use the latest nupool version and change the unit to USD and the exchange to ccedk? Would I need to use a different server than EU.nupool.net?

[cryptog]

I would be also willing to support the peg on ccedk on nbt/usd with a small liquidity (like 50 usd) without the fuss to remit cash from Japan to Denmark.
I did it once here.
I would not want to deposit a lot of usd (relatively) because it is too risky.
But if we can diversify the risks among say 100 custodians, I would be definitively in.
I would be interested in btc-e code.

[woolly_sammoth]

The eu.nupool server is only pointed to Bittrex at the moment in line with our custodial grant proposal here: [Passed] Trustless Liquidity Pool operation on Bittrex. We thought it best to restrict the number of exchanges that the pool operated on for this fisrt run as it meant fewer variables to untangle should things go wrong.
@Cybnate has been getting to know the pool server software and has suggested that she may start operation on some CCEDK pairs in the next few days. Current Liquidity
Once the NuPool term on Bittrex has come to an end, I would like to see it operate again across a range of exchanges.

[Nagalim]

It looks like the response was that you got little volume. Is that a bad thing? I don’t think so. The risk is way lower than nbt/btc, that’s why we want to do it. The rate could probably be lower than .25%/day and I would still be up for it. We should pay high rates for risky stuff like nsr/nbt and lower interest rates for nbt/USD. Clearly all liquidity rates should be higher than park rates at least.

As for btce codes, they’re a good way to go from btc or ppc to USD that you can move over to ccedk, as there is basically no USD volume on ccedk for any pair.