If this is totally naive, feel free to just let me know and I’ll prefix with
[Silly] and we can call this topic dead
This topic came up briefly in NBT/USDT instead of BTC/NBT for peg on Poloniex? where I mentioned:
I wanted to open the conversation here first with everyone to discuss the pros and cons…
Could we get rid of all automated US-NBT trading that isn’t tied directly to the US Dollar?
This would mean that we’d have sell walls for…
- USD: obviously
- TetherUSD: it is backed 1:1 with USD
- BitUSD (?)
- … any other suggests welcome…
We’d then treat any holdings in BTC as a form of diversification like any other non-USD currency the organization hangs onto…
1. We wouldn’t have to worry about the volatility of BTC
The downside of its popularity is that the price tends to fluctuate based on news reports (ie, Mike H’s post sent the USD price of BTC tumbling). We could stop worrying about that.
2. Our buy/sell walls would be accurate reflections of our intent
The goal of NuBits (from what I understood in the original paper by @JordanLee) was that you can always buy a US-NBT for $1 USD – and you can always sell for the same amount. This makes buying above $1 USD or selling below $1 USD is always a losing trade in the long run.
Right now, that’s not quite accurate because of walls happen to be denominated in BTC, not USD. If we trade specifically in USD, it seems like we’d be more accurately executing on the original goal.
3. US-NBT wouldn’t be used for hedging (USD would)
(I think this is actually the most important one…)
On several exchanges, our buy/sell walls seem to be acting as “the safe place” to put your BTC when you expect the price of BTC to drop. If it does drop, you sell back your US-NBT and get more BTC for your money – because we adjust our prices to always make 1 US-NBT = 1 USD. If it doesn’t, just hang on and if it ever does, we’ll always buy back from you.
In effect, we always buy and sell blindly, meaning anyone can look at the up and down waves, and time their trades to leave us holding the bag. I suspect that we’ve been able to survive because for the most part people want US-NBT and the price of BTC hasn’t been seeing as many downward slopes. If we start to see more ups and downs, it’d be easy for traders to win big entirely at our expense, which seems like an abuse of our liquidity intent.
If we aren’t a hedging option, people will instead sell their BTC for other currencies (USD, EUR, GBP) or alt-coins (LTC, etc), with markets dictating what they can get on those trades. If they want to then change their USD to US-NBT, that’s totally fine, but we’re not going to be the BTC market-stabilizer…
1. Not all exchanges support USD
This sucks, but it doesn’t seem impossible to sort out. There are quite a few that do support USD.
2. Fiat currency could be… tricky.
I think we’re covered by this through the exchange, but whenever we talk about holding value in a government-controlled currency, there are different worries. I think we’d need to confirm that we’re not opening a nasty can of worms here.
3. BTC is really popular
A lot of people hold BTC, meaning it’s the most liquid of the cryptocurrencies. If we take away our BTC walls, it’s possible that we could drive away potential NBT buyers.
4. Getting US-NBT wouldn’t be as convenient
For the same reason above, getting fiat into an exchange is not easy so people tend to rely on BTC. The process of “obtaining US-NBT” is now…
- buy BTC
- send it to an exchange
- sell the BTC for USD (this is the extra step)
- buy US-NBT
5. Logistically we’d need a spread to avoid filling our own order…
If we have our buy and sell orders at $1 USD each, we’ll probably fill our own orders… whoops.
To make this work, we could set our orders to be…
- sell NBT at $1.0001 USD each
- buy USD at 1 NBT each
(I think that does what we want, but perhaps I have some pieces swapped around…)