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?
Earn $10 Of Free Bitcoin From Brian Phobos!
Thank you for reading my post and please consider following me @brianphobos