NuBits Implosion (You Might Be Able To Profit)
You guys know I have been invested in NuBits to partially hedge my risk against this crypto crash. On the 18th of March I sold out of one of the last big chunk of NuBits I had and averaged down on some other cryptos including some STEEM. The only NuBits I had were like 200 of them that I "Parked" to earn interest on them which was about 35%. I was pumped up and this seemed like a really good deal.
I chose NuBits over Tether because Tether is centralized and could end up being there one day and gone the next. Like it could go to a $0 bid. NuBits isn't likely to go to $0 over night but there were always risks that it could lose its peg. It happened in 2016 and took awhile to recover. Suddenly during this crash NuBits had the highest volumes on Bittrex.
There are two reason I only committed 10% of my crypto holdings to NuBits initially. There was always the potential that crypto wouldn't see a lower low and everything would surge back so I didn't want to sell out of everything. Also there is no guarantee that NuBits is able to stay at a one dollar peg 100% of the time.
Look at all the other dollar pegged stuff. STEEM Dollars have been at $0.75 before and then it flew clear to $15 during the boom and now is coming back down like a falling knife with everything else. BitUSD is at $1.09 so it has broke away to the upside since NuBits had issues and SBD is out of wack and there is too much drama around Tether. BitUSD is confusing to people because you have to use BitShares as collateral and might have to commit more BTS to it if the price is falling. Tether in my mind is real suspect and is too dangerous for me to put money there.
What Happened To NuBits?
Basically there are 6 Tiers to attempt to keep it at $1. Tier 1-4 mainly revolve around having buy and sell walls on the exchanges and more capital ready to provide support so that if it gets below $1 buy orders will support it. If it gets above $1 there will be sell walls to keep it in line. Tier 5 is basically incentivizing HODLing by having people "Park" their coins or take them out of circulation in the wallet that way they don't hit the exchange as a sell order. Tier 6 is if all funds are depleted and then NuShares have to be sold for BTC and then that BTC is used to buy up NuBits on the exchanges to try to get it back to $1.
Here is more information about the Tiers. It is confusing but I feel like my explanation is a good starting place.
Ultimately when there was a little bit of good news about Bitcoin people sold a ton of NuBits for BTC and there suddenly wasn't enough BTC and ETH in the Nu liquidity operation reserves to buy it back up to $1. Then suddenly people panic sold scared it was going to fall way lower. The rate NuShares was being solid wasn't fast enough to provide enough support. This is my interpretation based on stuff in the forum and chat.
More Information About NuBits and NuShares
I don't know everything about Nu and I'm still learning but here are a few things I found out. For starters it is based on Peercoin. Nu is one blockchain and has US-NBT, X-NBT, NuShares, CN-NBT, and EU-NBT. So all those assets are on the same blockchain.
Think of NuShares like the voting rights and the investment piece of this kind of like STEEM or BitShares. By Staking NuShares Blocks are created by NSR shareholders. They get 40 NSR for each block. The only chance NSR shareholders can expected better returns ever is to ensure NBT is sold, operations are run smoothly and the coins are properly pegged.
My understanding is that NuShares and the underlying assets act like a teeter totter to attempt to maintain balance between each other. If there is huge demand for NuBits then NuBits owned by Nu liquidity operation reserves could be sold for BTC and then some of that money can be used to buy back NuShares to provide price support and an additional reason for NuShare investors to buy NuShares and create blocks for the Nu blockchain. Realize that if things get out of wack though and Tier 6 has to be used then NuShares will be sold to get BTC to buy more NuBits to create support.
Similarities To STEEM Dollar
Oddly enough in 2015 Dan Larimer the creator of BitShares and STEEM compared NuBits to a Ponzi Scheme. http://archive.is/EmBdj#selection-231.72-231.123
Then turned around a created a somewhat similar mechanism with STEEM Dollars. LOL There was even a post two years ago when NuBits had to implement Tier 6 and ran into the same situation which ultimately lost the peg but then eventually recovered. People in the comment section even called out the fact that NuBits has similar mechanisms to STEEM Dollars.
https://steemit.com/bitshares/@steempower/warning-nubits--the-price-stable-currency-
I have seen STEEM Dollars at $0.75 or lower and to provide an incentive to HODL at those prices the witnesses voted to raise the interest rate up to 10% at one point. Well with NuBits they raise the interest on "parking" and you are given additional NuBits to lock them up in the wallet. That is Tier 5. Here are the park rates right now with NuBits at $0.38.
So as you can see the annual interest rates are up around 48% for parking your NuBits to effectively take them out of circulation. There is effectively 70.3 Million NuBits and only 10.4 Million are in circulation currently. In the example screenshot you can see that having 1000 NuBits parked will earn you and additional 9 NuBits in a weeks time.
So Dan Larimer compared the system to a Ponzi Scheme back in 2015 and then created a similar system in 2016 with STEEM Dollars and let's not forget that STEEM had an undeniably unfair distribution from the beginning and then 100% inflation rate on top of that. People outside of STEEM were comparing it to a Ponzi as well. I'm not trying to talk smack about Dan and I've went in fairly deep on EOS. I think he does great work but the reason I'm saying this is because oftentimes people compare so many things to a ponzi. People have compared Bitcoin to a Ponzi scheme. Shit....your mom is a ponzi scheme for having so many kids and making you all do chores around the house.
You get the point.
BitConnect is the true iteration of a Ponzi because it was paying people supposed returns that were fabricated by saying that a trading bot was making gains but it didn't actually exist. Mathematically it couldn't even support the pyramid portion of the Multi-Level Marketing referral system. It was very clear that when the market corrected they would have to exit scam everyone.
How Can You Profit Off This?
- You could buy NuBits at prices below $1 in anticipation that it will return to $1 like it has before.
- You can park your NuBits and earn additional NuBits for HODLing and sell when it is at a higher price.
- You could Buy NuShares at low prices and Stake them earning more NuShares and if everything returns to normal the price of NuShares will likely rise because at least Tier 6 operations won't be in effect selling NuShares for BTC to create buy support for NuBits. Here is the NuShares chart. A person could earn a fat gain if things spike like they did a couple months back.
Should You Do Any Of This?
Like any crypto investment there is no real guarantee that the project will survive or maintain support. Certain projects in my mind have survived the test of time and will likely hit higher highs eventually and will keep people's interest. I'm not really sure if NuBits is one of them. NuBits and NuShares got booted off a lot of exchanges int he past couple of years which hasn't helped so that situation needs to be improved. It is all a risk but people are averaging in on these coins to get their cost basis lower and earn "parking" rewards. People are willing to speculate that NuShares will pump again and they want to earn "staking" rewards.
There is always that risk that NuBits falls to $0.20, or $0.10, or $0.0001. Weight the risk and only commit what you are willing to lose if you want to take a chance on it.
What I'm Going To Do
I have coins parked right now and when those become unparked and I also get the NuBits earnings from doing that I'm going to park them again and keep doing that to earn more and more. If the price gets low enough I might average everything down and park those coins as well earning more and more NuBits. Once things seem to find a bottom I will likely try to buy up a bunch of NuShares as well and stake those and hopefully everything returns to normal in the future and my stack of NuBits are all worth $1 again and my NuShares are worth a lot more. If history repeats itself everything will work out but there is a chance it won't.
What Needs To Happen
- More marketing needs to be done to inform people how this system works. It is super confusing and I certainly don't know 100% of what is going on.
- NuBits and NuShares need to be put on more exchanges. Especially NuShares immediately.
- More communication from the team. They are busy but people are freaking out and oftentimes it is radio silence.
- More team members need to be added.
Do You Guys Think NuBits will survive? Are you going to take a chance on it?
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I think about it. Most likely, this method (collapse of the course) simply covers a debt from a crazy interest rate on a deposit, but perhaps it just R.I.P.
Could you answer a few questions please:
Where? I see only 2 exchanges cfinex and SouthXchange,
I think that very few people will go to such exchanges.
No the interest isn't always at 48%. A couple of weeks ago it was at 34%. The NuShare holders vote for what interest rates they want. It gets raised in this type of situation to encourage buying and holding. Also one thing that I didn't mention is that there are periodic burns for NuShares in decrease the supply in certain situations. It is a very intricate system and hard to understand all the pieces.
Yeah NuShares only has the two exchanges right now and they are hiring for someone to do marketing to get NuShares on more exchanges. You can also buy large amounts of NuShares from the core team as well from what I was seeing on the forum. They mainly are using the BTC to buy NuBits to increase the buy support back to $1.
I did the math on NuShares and if I buy $100 at current prices and it goes back to $0.02 which was an all time high then my NuShares could be worth over $7,000. Plus I would stake the NuShares and earn additional NuShares and be parking my Nubits and earning more NuBits in anticipation for NuBits to go back to $1 and NuShares to go up in price in the future as well.
I'm willing to bet a little bit on this. Maybe it implodes 100% but it has came back in the past and the reward is looking juicy if it works out.
You do not know where I can look at the statistics on interest rates?
For me it's definitely a pyramid! But I probably risk with NBT, if the price drops to 15-20 cents. My idea is that by such a drawdown they burn their debt. It's as if SBD fell 20 cents - then it would be profitable for the system to redeem it)))
They should have parking rates listed on the block explorer or something but I don't think they do. I look at them in my NuBits wallet. There is a button that says "Park" that I click on and it shows it. Also park rates can be shown by typing in certain commands in the QT wallet as well but it is easiest to just hit the "park" button.
What do you mean by it's definitely a pyramid?
I'll try to find, thanks!
additional NuShares and Nubits can be paid only by the arrival of new investors. If they do not come, we see what is happening now)) It's a pyramid.
Still meaning to take a peek at Nubits
It is intriguing for sure. It appears that Dai and BitUSD mainly rely on posting collateral but with SBD and NuBits the system is designed so that a user wouldn't necessarily have to be involved in STEEM or NuShares respectively. The NuShare prices could end up looking pretty juicy and I might throw a couple hundred into it and if everything survives it could possibly produce thousands of percent gains. But who knows..... I'm still trying to learn all the pieces of the puzzle on this one.
Man, you did a great job! Thanks for this detailed analysis. I did not even know that they had such an intricate peg system. In fact, this is a fairly simple and profitable business, selling at 1.05 and buying at 0.95, apparently a problem in 48% per annum on a deposit.
Damn that peg looks thoroughly broken, not looked at the mechanics of it behind the scenes. Maybe consider Dai which has so far been fairly stable. Not sure any currency can maintain a stable peg to FIAT, even FIAT is unstable.
The ones that have a collateral mechanism like Dai or BitUSD are sort of weird to me because you have to have such ample reserves and be invested in the underlying crypto. With SBD a person could technically have it and send it around without having any STEEM. Same with NuBits .... A person doesn't have to have NuShares to utilize it.
I think you are right about no currency maintaining $1 potentially. It is a tough task and people panic sell like crazy or panic retreat to it. I think there is hope to return to $1. All it takes is for investors to get greedy. Staking is a big reason NEO is popular so the premise that people will park their coins and earn more and have a chance to get an increase when it returns to $1 should make it an enticing offer
I have a faith that all will recover soon but BTC has to recover first because all damn coins follow suit. BTC must be introduced and advertised to the public so that many could use it and make its price surge again. But we all are waiting for institutions to make their move so that it would create a ripple effect on the market.
Yeah I'm hoping that everything can find a floor level and start building from there soon.
I expect it to go back to $1 eventually, the trick is knowing when.
Yeah I have a feeling it will make it back as well. Investors like us are licking our chops at the opportunity to buy low and make some gainz!
Great write up....There are some upcoming issues with these pegged currency coming up for some I think our safest bet would be conversion back to our base fiat...The word "guarantee" is not a word regulators like and this is the problem with these pegged currency, the volatility of crypto makes these initiative schemes fraudulent, once the SEC and other regulators get around these, I believe the lawyers representing these projects would have to craft their ways around it....For me its better that these project work towards providing flow and range and specific range like 5-10% within a given value, you would see more of this once the SEC gets around it...I believe Tether is safe for now and looking at the changes they implemented I suspect it was the SEC and FTC recommendation...If you look at the broader currency market, within the basket of currency in Caribbean some are pegged to the US dollar from time to time the varying Central Bank struggle to maintain the pegged and they go wack, so for now if you want to stay out of later legal issues, its better to have bank with reserves that can be audited at anytime because even countries Central Banks struggle to maintain their Current Account, not to even mention the erratic nature of cryptocurrency, adopting a floating exchange mechanism may be a safe bet moving forward...
I think you are right. It is so hard to maintain it around $1 oftentimes. I'm ok if there is no real guarantee or anything as long as it was pretty consistent around those prices like you said.
I havn't really checked crypto prices in like over a month, seriously have maybe looked at 2-3 prices over the past month, don't pay attention to news, don't spend time on crypto reddits.
Last night I was grabbing sushi with a buddy and he showed me the charts. It almsot made me puke, the entire market is getting demolished.
On a totally different side note, I think I'm going to be doing a livestream with a crypto prankster captainshorif sometime next week. I know you kinda dig the pranks you'll have to check it out when I post it on here. I've never done DLive, but maybe I'll see if I can go live on DLive and Youtube simultaneously
Yeah you don't really want to look at crypto prices at this point to be honest. It is a very dismal situation to say the least and I would in some ways like to not look but for certain reason I have to.
Kicking myself SO HARD for being greedy and not taking profits. Had I taken profits at not even the top but say 15k, 13k, 11k, right now I'd be throwing some money in and forgetting about it for 2 years
I know what you are saying for sure. I tried to "play it safe" with part of my holding and bought NuBits to protect myself and then that even lost its peg. That could have been way worse for me and that could present and interesting situation but the market is pretty savage right now and the ones who can really clean house are people who have enough fiat to become whales for the next surge.
I think everyone is pretty disillusioned at how fast this boom and bust cycle has been. It is moving at a super fast pace it is insane.