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Overcoming Stablecoin Concerns
Arthur Hayes, former CEO of the crypto asset (virtual currency) derivatives exchange BitMEX, announced on the 8th that the stable coin “Satoshi Nakamoto Dollar, NakaDollar (NUSD)” backed by the delta-neutral position of Bitcoin (BTC) ” advocated.
Delta-neutral is a state in which equal amounts of long and short positions are held, and overall asset fluctuations are kept to zero. This means that you are hedging your physical position exposure to zero.
The basic mechanism of NUSD is that traders hold a $1 short position against a $1 bitcoin (BTC) deposit on a derivatives exchange. To simplify the issuance process, an “inverse bitcoin perpetual swap” is envisioned that allows shorting bitcoin perpetual futures with -x leverage.
By holding an equal number of longs and shorts, the “dollar value” of the NUSD collateral assets remains stable as the value of Bitcoin fluctuates.
One of the benefits of NUSD is that it overcomes the regulatory risks associated with stablecoins that the cryptocurrency community currently faces. Dependence on “dollar reserves” held by regulator-sensitive banks, such as Tether (USDT), USDCoin (USDC) and Binance USD (BUSD), the top three stablecoins by market capitalization , Hayes pointed out.
In February 2022, the New York State Department of Financial Services (NYDFS) just ordered Paxos National Trust (Paxos Trust Company) to suspend new issuance of the US dollar-linked stablecoin “BUSD”. In March, US-based Silvergate Capital announced a policy to suspend banking services for cryptocurrency-related services, shaking the cryptocurrency market once again.
Arthur Hayes argued that NUSD could remove the recent “FUD (Fear, Uncertainty, Doubt)” that threatens the existence of stablecoins in circulation in the cryptocurrency market.
By removing this fear, traders will be able to trade more because they no longer have to worry about having a large amount of stablecoins that cannot be redeemed 1:1 with the value of the US dollar.
connection:Bitcoin temporarily breaks $ 20,000, multiple negative factors put downward pressure
Advantages and risks of NUSD
Hayes also hopes that major crypto derivatives exchanges in the industry will adopt NUSD, making it a widely available stablecoin for centralized exchanges (CEX) and DeFi (decentralized finance). there is
The cryptocurrency market has the tools and institutions necessary to support the issuance of over $1 trillion of NakaUSD. If the solution is accepted by traders and exchanges, it will lead to significant growth in Bitcoin derivatives open interest and deep liquidity.
He also added that NUSD could serve as a key currency for the entire cryptocurrency ecosystem and has the potential to provide a stable unit.
This will help both speculators and hedgers. It will be a vehicle that benefits not only participating exchanges, but also DeFi users and anyone who needs a low-cost, 24/7 transferable USD token.
The Ethereum blockchain is assumed as a specific issuance platform for NUSD, and the establishment of “NakaDAO (Decentralized Autonomous Organization)” managed by the ERC20 token “NAKA” is also proposed. This DAO will not only manage the NUSD policy in the community, but will also collect the issuance proceeds.
In addition, Mr. Hayes said that as an assumed risk factor for NUSD, when the value of collateral BTC drops sharply, exchanges intervene to reduce short profits or settle “Socialized Loss”. Point out the possibility of occurrence. He called for a supplementary fund.
Other risks include hacking of exchanges and increased fees for short positions (negative funding rate).
connection:Former BitMEX CEO Hayes under house arrest for six months
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