NuBits (USNBT)

Basics

Seems to have a connection to NuShares.
A stablecoin first introduced in 2014.
NuBits has suffered two big crashes (13-7-2018), with extended peg breaking:

"In 2016, NuBits’ peg infamously broke, and it remained broken for 3 months. The initial price drop happened between May 26th and June 20th, 2016. This was about the same time that Bitcoin’s price suddenly spiked, after 6 months of relative stability. It’s plausible that the drop happened because of the following: People who had capital in NuBits saw how Bitcoin was spiking. They wanted to get in on the spike, so they sold their NuBits in large quantities to buy Bitcoin. The NuBits peg was unable to handle the large sell-offs and broke. The price tanked and the peg stayed broken for an extended period.

After NuBits crashed in 2016, its market cap grew 1,500% on Coinmarketcap between the end of 2017 and the beginning of 2018, going from $950k to $14 million. This is strange, considering the NuBits peg had been broken for such a long period in 2016. Their market cap had been stagnant for years, and suddenly it takes off. Was this spike just an accounting error, or had people suddenly decided NuBits was actually amazing? People were buying millions of NuBits in late December. The price of the NuBits stablecoin was notably above its $1 peg between December 20 and December 28, when it peaked close to $1.50(!).

What caused the increase? It’s clear when one looks at the Bitcoin price history. The NuBits high price period starts when Bitcoin had its “Christmas crash.” By December 22 there was a strong news narrative about Bitcoin crashing.

This shows how when Bitcoin and cryptomarkets crash, capital rapidly flows into stablecoins. NuBits faced a lot of downward pressure as people sold it off to try to get in on a Bitcoin spike. But the crash ensued because the NuBits protocol wasn’t designed to be able to deal with it. The way to deal with these cycles of downward pressure — caused in part by lack of diversification — is to have large reserves, potentially many times over circulating supply, which can be quickly used. NuBits had only a small, fractional reserve that was not algorithmically controlled. It could not be used to automatically, with arbitrageurs, cover the drop in demand and keep the price unaffected.

Nubits repegged in September 2016 and saw its peg break again on March 21 of this year. This second crash was also caused by insufficient reserves. A lack of reserves prevented the NuBits team from being able to protect the NuBit price from a small demand dip. Holders selling off dropped the price further, causing a rapid cascade. A contributing factor was that NuBit reserves were stored as Bitcoin. Most of the reserves were created a few months ago when Bitcoin was high and people bought a lot of NuBits. The value of the NuBits reserve fell as Bitcoin’s price fell.

Overall it seems that Nubits was a victim of its own design: improperly diversified collateral and, on top of that, not nearly large enough reserves to maintain the peg."