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.