Quote from: brg444 on November 10, 2014, 06:52:55 AM

Quote from: NewLiberty on November 10, 2014, 06:35:34 AM

The demand is supported by the "peg".
There is a profitable trade, people will buy.
If BTC is rising faster than the scBTC, do you think people will not buy the scBTC?
It doesn't matter much what the feature the side chain adds, or whether there is demand for the feature. The feature matters less than the prices.

The losers will be the folks waiting on confirmations when it unwinds.... or if it doesn't unwind, BTC holders lose liquidity (which could cause the pump to go higher than it otherwise might).

I fail to see what the profitable trade is.

You said BTC price rises faster than scBTC so one would think people would want to buy scBTC at discount but then you say that scBTC is actually going for a premium because of convenience to avoid SPV confirmations.

Quote from: NewLiberty on November 10, 2014, 03:48:52 AM

There is money to be made simply from SPVing coins, and then selling them at exchange to anyone that wants them but does not want to wait for SPV confirmations (which will be more than the exchange will require).

Which is it Huh

If BTC price rises faster and you are holding scBTC why sell scBTC at discount to exchange buyers when you can use the peg to claim equal value to BTC?

Otherwise it sounds to me like you are describing a regular arbitrage type play. Something only speculators would take part in and I honestly don't see how this can scale to the extent that BTC would lose significant liquidity.

How do you describe it "unwinding". How does those waiting on confirmation lose?

It is a lot more simple than you think.
The BTC price rises faster, because that is the first purchase in this scenario.
Then SPV the BTC to scBTC.
By the time these are confirmed, prices should have equalized (because they are pegged, right?)

But... scBTC should trade at a premium on exchange because it avoids the time cost of the SPV.
So both are true: BTC rises faster, and scBTC trades at a premium on exchanges.

BTC doesn't have all that great liquidity now, market cap may be in the billions, but even just a few million dollars moves the market quite a bit.
This process would exacerbate this issue, to the benefit of the speculator.

It is interesting that you bring up arbitrage (which is somewhat different from a peg in that it is for the same asset rather than pegging two different assets).
If it were arbitrage, it would raise other issues such as "wash sale" tax rules. This may be a "new" problem if scBTC and BTC are deemed by taxing authorities as the same or equivalent asset. It is already going to become an issue with the CFTC and the Winklevoss ETP soon enough.
The tax authorities are complicit in creating and fostering the illusion that the paper asset is the same as the real asset. (and that a Winklevoss ETP bitcoin or a coinbase coin are the same as having bitcoin in a wallet you control).