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MGI, ODL, Bitso and a theory about the price


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14 hours ago, BillyOckham said:

Actually there is another var they can control.  I think the more reasonable and sensible control would be the fiat volume control.  That manages the liquidity as well as using the XRP var would.


I agree with all that you and Julian say,  but if you are correct,  and the limiting factor IS the absolute number of XRP involved then that bothers me somewhat.  
 

Firstly because I can’t understand why they would do that rather than simply throttle the fiat volume by selective transaction processing....  allow only a certain amount of FIAT throuput per hour through and use existing correspondence corridors for the remainder.  
 

Secondly because that implies that the XRP are not being bought at market in USA and sold at market in Mexico.  It implies a XRP bag already existing of a certain size.  (Otherwise the limit would be fiat not XRP)

That loss of buy side pressure is a concern (if it’s really absent) and adds to my mild concern that the LineOfCredit offer of XRP loans elsewhere is also removing buy side pressure.  I know Ripple would be aware of those effects and would try to mitigate because they don’t want a lowering XRP price, quite the opposite,  but I’m not sure they could do much apart from buy in big quantities and that doesn’t seem prudent, sensible or appropriate.

 

I'm not sure that's true actually. I think it makes a lot of sense that XRP is the limiting factor. 

This whole system relies on market makers, who rely on arbitrage to make a profit. Every day, market makers on one side of the transaction are only buying XRP, and thus end up with a surplus of XRP that needs to be changed back into the local currency. The other side is only selling XRP, and thus end up with a surplus of local currency that needs to be converted back into XRP. 

The rebalancing that needs to happen is the real limiting factor. And market makers' ability to rebalance is limited by liquidity, not price. So it makes sense that ODL has been throttling based on the volume of XRP that market makers would be able to rebalance while still making profit each day. 

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I think it's a bit presumptious to think that your opinion is desired by others, no?  Maybe leave this thread if you don't like it.  It's not what you're saying, it's the rude way in which you are say

Even tho Molten has bowed out, I'm guessing a few "ODL Watchers" remain here with me, and remain interested... With the BS/Bitso trade activities I've been monitoring all these months, I'm noting

Just FYI: December is starting to look interesting from the ODL traffic point of view. These numbers should not be taken too seriously as some might not be ODL directly, but the trend is very pos

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1 hour ago, doopers said:

The other side is only selling XRP, and thus end up with a surplus of local currency that needs to be converted back into XRP

yep, so you need a flow back into the US

Interestingly, that might be exactly what the LOC (line of credit) is facilitating.

Ripple has mentioned explicitly that ODL users can pay in their local currency.

So, if a money provider that is sending (XRP) from Mexico to Phillipines uses LOC, they pay Ripple in MXN.

Ripple uses that MXN to buy XRP on Bitso to send back to own wallet.

That way, the Market Maker's rebalancing is actually helped/done by Ripple.

Normally Ripple would not be involved, but as they have stated, LOC removes thresholds for companies to start using ODL.

LOC is absolutely brilliant imo because this way it acutally kickstarts the rebalancing

That rebalancing might have been one of the limiting factors until now, because it's more expensive given the use of traditional rails

Edited by Frans
fat fingered typing ...
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Here is the Bitso XRP trade DAILY volume metrics over the last two months, juxtaposed below with the global price valuation in USD - showing the daily bars of Klein price data. 

Please note in particular, the XRP valuations of the first and second weeks (on chart left) ...

Specifically, observe how during the first five days the price ranged from .30 to .23 USD.
BUT... Look at the volume bars at Bitso: You can plainly see each day (tues-friday) was around 12m traded.
( Note: the bar 60 is missing 6 hours of data, I really need to fix that defect, arg! )

My key point is demonstrated here - the apparent trading behavior is inelastic to pricing fluctuations. While more value, or less value gets transferred each day, generally the same allotment of tokens are traded. 
 

Screen Shot 2020-10-29 at 10.40.01 AM.png

Screen Shot 2020-10-29 at 10.44.15 AM.png

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3 hours ago, JASCoder said:

Here is the Bitso XRP trade DAILY volume metrics over the last two months, juxtaposed below with the global price valuation in USD - showing the daily bars of Klein price data. 

Please note in particular, the XRP valuations of the first and second weeks (on chart left) ...

Specifically, observe how during the first five days the price ranged from .30 to .23 USD.
BUT... Look at the volume bars at Bitso: You can plainly see each day (tues-friday) was around 12m traded.
( Note: the bar 60 is missing 6 hours of data, I really need to fix that defect, arg! )

My key point is demonstrated here - the apparent trading behavior is inelastic to pricing fluctuations. While more value, or less value gets transferred each day, generally the same allotment of tokens are traded. 
 

Screen Shot 2020-10-29 at 10.40.01 AM.png

Screen Shot 2020-10-29 at 10.44.15 AM.png

So tokens are the limiting factor, and this is probably being managed.  Conclusion they can let her rip at a time and date of their choosing?  

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11 minutes ago, Julian_Williams said:

So tokens are the limiting factor, and this is probably being managed.  Conclusion they can let her rip at a time and date of their choosing?  

Hi Julian :)
Capacity scaling is typically managed incrementally, for reasons not just limited by the unknown stress dynamics, but by practical constraints as well. 

For example, take a common production chain - like building cars. You don't tool up the whole chain at once, but you build more floor space, hire more labor, contract up new parts and material quantities, and shipment scheduling, and so on.

For ODL, the crucial market makers must allocate additional capital to tie up in their committed utility. The demand to utilize that capital must either be present, or come online fast enough to generate additional arbitrage profit to help cover the additional committed capital costs (ie loan interest), and so on.

Their flywheel metaphor is so perfect for describing this system's rollout; as you add more energy to a spinning disk, you never want it to slow down, but maybe continue accumulating more potential... 

So roughly, I've been estimating this last "bump up" at Bitso, was like 25% additional capacity ? And perhaps in a few more weeks we'll either see it retract, or bump up another significant notch :)

Hopefully, eh ?

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8 hours ago, doopers said:

I'm not sure that's true actually. I think it makes a lot of sense that XRP is the limiting factor. 

This whole system relies on market makers, who rely on arbitrage to make a profit. Every day, market makers on one side of the transaction are only buying XRP, and thus end up with a surplus of XRP that needs to be changed back into the local currency. The other side is only selling XRP, and thus end up with a surplus of local currency that needs to be converted back into XRP. 

The rebalancing that needs to happen is the real limiting factor. And market makers' ability to rebalance is limited by liquidity, not price. So it makes sense that ODL has been throttling based on the volume of XRP that market makers would be able to rebalance while still making profit each day. 

I agree that the Market Makers are the critical component at this time.  (Perhaps later the market liquidity will just be organic users with Market Makers not strictly necessary but acting for themselves and resulting in small spreads.) And that the rebalancing is the limiting factor for them, and hence ODL.

 

Everyone I see discussing this type of thing seems to be thinking in terms of discreet corridors without factoring in that the XRP “in” Mexico can be “in” Australia or Europe Or anywhere else three seconds (plus Exchange processing time) later.  So the Arbitrage opportunities/challenges are much more complex than it would appear by simply looking at a US - Mexico corridor.

Not saying that you are not aware of that...  just that the rebalancing is potentially much more complex than merely building a surplus of USD, XRP or Pesos.  The end game state will hopefully have organic trades doing that rebalancing in a holistic fashion.  But yeah...  liquidity and rebalancing are definitely limiting factors at this time.

But I don’t see how you go from that to ‘therefore XRP Volume is the sensible throttling var’ (paraphrasing).

In fact,  XRP is the easiest of the three components (USD, Pesos, XRP) to deal with,  so in a way it’s the least likely to be the throttling var.  USD is a standard so it’s not likely either.  Really the limiting factor is in-country FIAT I think.  Specifically in this case, Pesos (more so than USD).  


This thread has recently had a number of points I would like to discuss but time is limited just now so I will come back to further discussion points later.

I would say that for the reasons I just mentioned (and others), I’m not yet convinced that XRP is the limiting var in spite of @JASCoder ‘s excellent work this far.   

 

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Nice, normally almost all activity stops in the weekend, but 2 clients are sending constantly atm. MGI stopped at 7am UTC+1 as always, but USD-PHP and USD-MXN are still sending every couple of minutes.

Still early, maybe they stop later today, but might be a real change.

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2 hours ago, Frans said:

Nice, normally almost all activity stops in the weekend, but 2 clients are sending constantly atm. MGI stopped at 7am UTC+1 as always, but USD-PHP and USD-MXN are still sending every couple of minutes.

Still early, maybe they stop later today, but might be a real change.

This weekend day is starting out at Bitso differently - usually the whole weekend is flat near-zero, with an occaional single hourly spike.

Let's see how the rest of the weekend plays out... 
(Green line is 500,000 XRP volume) 
1860888349_ScreenShot2020-10-31at11_15_02AM.png.677fafe5ae9632d1487fc943b58ed3a3.png

Edited by JASCoder
Added comment as to chart's context.
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On 10/31/2020 at 7:16 PM, JASCoder said:

This weekend day is starting out at Bitso differently - usually the whole weekend is flat near-zero, with an occaional single hourly spike

It held through the weekend, nice.

The current frequency of tx as shown by @mouradski's https://utility-scan.com/#/dashboard is now between 2 -4 per minute. That is way higher than it was even 2 weeks ago.

Normally the MGI payments were every 7/8 minutes, with some other clients in between, but was max 1 per minute, of that. It is now consistently at least 2 to 4

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