[WARNING] NuBits - The price stable currency... until it’s NOT!!

in bitshares •  3 years ago

The walls are broken - Market opportunity for Bitshares to fill a need!


Update 9-June-2016 - Updated chart at the bottom of this post for a picture of the current market in comparison to the original content

Disclaimer: I am not a NuBit Expert but this is what I see from my research

Seems like the rise in Bitcoin price as put some big pressure on the NuBits network; i shouldn't even say network its more like a bunch of people acting independently with a common goal and the network facilitates transaction.

Nubit uses 6 Tier's of Liquidity to provide a peg with the USD for their NuBIT (NBT) currency; this peg has been maintained for the last 20 months relatively well.

The current supply in circulation of NuBits is 757,084 and at current price that means a total market cap of 757,084 USD; problem is that this 757,084 dollars’ worth of NBT is being backed by only less than 5000 USD worth of bitcoin at the moment and the peg is being broken to the down side!

Tiers of Liquidity

Tier 1: Liquidity on the Markets orderbooks seen as Buy and Sell Walls
Tier 2: Liquidity on Exchange but not in Orderbooks
Tier 3: Liquidity held in private wallets
Tier 4: liquidity can be provided by custodians not dedicated to liquidity operations.. ?
Tier 5: Manipulate intrest rates for Liquity providers to incentivse individuals to support the peg (via proposals)
Tier 6: Create and/or Sell Nushares at market and uses the BTC received to support the NuBIT peg

Historically before this week Tier 6 liquidity has never been required; NuBIT is currently using Tier 6 (Selling NuShares at market to recover BTC) in an attempt to save their NBT:USD peg

Tier 6 in action : selling NuShares (NSR) to gain BTC to support the wall

Coinmarketcap chart showing USD value of NBT over 1 Month

Current Liquidity of Nubits BTC:NBT PoloniEX

Current Liquidity of Nubits BTC:NBT Bittrex

Liquidity measured in NBT

Walls are not sufficently supported and have broken already; given they are at their last Tier of liquidity and they are struggling to recover; I think it maybe to late already but if BTC move's up further in the next week I am calling game over for NuBits and I think the whole system will collapse.

Resources:
NuBits Liquidity monitor: https://alix.coinerella.com
NuBits Liquidity Forum: https://discuss.nubits.com/t/current-liquidity/1239/1830
Good call by Dan months ago: http://bitsharesblog.com/nubits-vs-nxt-vs-bitshares/

Update - 09-June-2016
NBT is currently selling for 84cents per NBT 16% less than the pegged value

Even at this low price the market depth on PoloniEX (their biggest liquidity) is very low

if price moved to where my crosshair is it would be worth 58 cents per NBT! - only $680 USD protecting this level

NuShares NSR price

Update 9-june-2016 - later that day
Seems like the 680USD didn't go very far; NBT is now trading at 63 cents and the candle low was 50 cent

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This is a recent interview with 2 core members of the NuBits team by the Epicenter Bitcoin crew; alert are raised listening to that, but then digging a bit further suggested the issue's really ramped up in the last few days
https://letstalkbitcoin.com/blog/post/epicenter-bitcoin-133-pascal-and-julien-hamonic-applying-the-mechanisms-of-thermoregulation-to-cryptocurrencies

And let's not forget Dan's critique of NuBits. The Internet hasn't forgotten:
http://archive.is/EmBdj

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After reading this article it seems to me that Steem is a ponzi-scheme according to dan's own words:

It only becomes a Ponzi scheme once NuBits is forced to print new NuBits to pay interest on old NuBits

and

The NuShareholders vote on an interest rate that will be paid to NuBits holders whom volunteer to park their NuBits for a defined period of time. The interest is paid by the issuance of new NuBits. In other words, parked NuBits get a return paid from future investors. If there are no future investors then the interest rate would go to infinity and the entire dollar peg would break down. This is the classic, text-book, definition of a Ponzi Scheme.

Don't shoot me for bringing this up :-)

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Yes it look the same as sbd

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From Dan's original post:

Prediction for NuBits
The NuBits Ponzi scheme will eventually collapse unless the Bitcoin price can recover before there is a run on NuBits. It will probably continue to maintain a strong peg right up until the day it collapses. When it does collapse it will be sudden and the NuBit holder will get nothing.

It would be interesting to hear from @dan if his original thinking is one of the scenarios that is currently playing out now. Although I'd very much caution that it's done in the spirit of understanding and learning from failure - and not as 'I told you so'.

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Yes i remember the day it was posted.. caused a lot of upset in the NuBit community. lesson if Dan talks you listen... better go sell my Lisk

The update tells me how important it is to have a lower bound ensure by force settlement in BitShares.
Anyone selling below parity in BitShares is making a loss and Merchants can still be sure to get parity for their bitUSD.

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You should make a post regarding this information and really lay out the mechanisms that make it tick; i like trading but all the force settlement, short squeeze protection and other intricacy that are in the BitUSD market were really baffling and i think others must be in the same boat.

Even just you comment above i would love to hear a bit more detail; think it would be best in it's own post so that gets some active discussion; feel free to reference this post or use my chart images if your decide to go ahead with it.
i know you have the knowledge to fully explain it and it probably seems simple to you being so close to the platform.

Interesting post and relevant to Steem as the mechanisms behind Steem Dollars are similar in some (though not all) ways.

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The mechanisms behind Steem Dollar are way different. Steem uses a price feed (from the witnesses) that levels over time and gives a "settlement price" for Steem Dollar into Steem. The settlement price is assumed to be "fair" even though it is (moving window) averaged over a couple of days.

What you are probably referring to are the incentives for liquidity providers to trade at the peg as they get paid to do so. However, they don't hold the peg, the merely trade around it.

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I was also referring not only to the use of subsidized market makers for real time liquidity, but also the use of a variable interest rate to influence investor demand. I agree the supply mechanism is completely different, and SD has less risk of being overleveraged, but the risk of collapse is still there and the white paper acknowledges it.

you just made me drop all my NBT. watch out for red candles ;)

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nice timing :); look at the chart now

It doesn't look good !!! 1 NBT = $0.65

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yeah and it hit 50 cents in the last candle :/ long live BitBTC and Steem backed Dollars

So is it a wise invest decision to buy some NuBits right now at price $0.34 knowing that it should theoretically go back to 1 NBT = $1?

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That's only if you really think it is going to go back to $1. I would suggest you do more research...Try https://discuss.nubits.com/c/nubits to see if you feel like investing in it still.