Using BTC/USD liquidity as buy support for NBT/BTC


#1

Continuing the discussion from Motion to express that shareholders prefer dividends instead of NSR buybacks:

In @pennybreaker’s comment, switch out Peercoin for Bitcoin.

If whenever a NuBit is sold in NBT/BTC, NuBot had the capability of creating a sell limit order for the BTC on an exchange with a liquid BTC/USD pair, it would greatly minimize exposure to volatile markets. The same concept can be applied when a NuBit is bought from NBT/BTC.

Not all of the sell orders will go through, but whenever an order did fill shareholders or custodians would not be exposed to any more volatility on that particular transaction.

This would require more funds on exchanges and more balancing by the custodians, but I think the losses incurred by Nu will be reduced drastically.


#2

This is an interesting idea but worth pointing out that NuBits sold for bitcoin are still controlled by shareholders because they end up in the buy walls. You’re taking my quote out of context. We were talking about diluting the market with NuBits sold for Peercoins which would not end up in the buy walls because they would be distributed as dividends and thus would no longer be controlled by shareholders. It is an interesting idea that is worth it’s own discussion though.


#4

Three challenges off the top of my head that would need to be overcome to make this a reality:

  1. Time it takes to move crypto (in particular, BTC) across exchanges. A lot can happen during the two plus hours it takes for confirmations to appear (6 in, 6 out) if you had in mind a need to quickly move liquidity.
  2. Many exchanges lack the ability to deposit and withdraw funds through an API. Asking the custodian to manually move funds after every sale or even after X number of sales doesn’t scale.
  3. Depending on the custodian’s postion, holding large amounts of fiat in an exchange acount may trigger different KYC/AML regulations or expose them to tax implications.

I agree that tools like this are good options for the network, if we can make them scalable.


#5

I envision a modified NuBot which creates orders on a BTC/USD exchange in the event one of my orders is filled on the NBT/BTC exchange in which I am operating on behalf of Nu. It should allow for profit on the BTC/USD order, but could also execute at market if the operator wishes. Adding stop losses would also make it pretty attractive.

This would require the LPC have a large amount of funds on the BTC/USD exchange. Much more than is being provided in liquidity, but imagine how Coinbase operates with it’s brokers. There is a market price that they are obligated to pay, but they get high volume. Being an LPC is Nu’s version of being a broker for Coinbase, as I see it. They use tools like this.

To try to be more clear, for every NBT that someone buys or sells in trade with me there will be a BTC/USD sell or buy limit order created at the break even price (or maybe to allow some profit :heart_eyes: ) . My funds in the NBT/BTC pair stay there and are not effected by the BTC/USD end of this.


#6

I think this idea has been discussed in the past in a PG’s thread on how to reduce exposure to volatility. He also suggested entering Future markets. Someone else recently proposed to buy eGold.

First keep in mind that if you use the full proceed from sale of NBT to buy USD you will run out of buy liquidity on that pair.

There are two cases in Nu custodians (now three maybe)

  • The liquidity is provided by shareholders (NBT grant)
  • The liquidity is provided by the liquidity provider
  • The liquidity is provided by a pool of liquidity providers

Now, to make your proposal work, that should imply that for some reason the initial liquidity provided should come in form of NBT BTC and USD .

Otherwise there is no way custodians can mirror the order on the BTC/USD order book.