Topic: Token/Coins pegged to real goods - Negative prices (Read 309 times)

It's actually very difficult to peg the price of crypto to the price of fiat currency. Moreover, crypto currency is volatile. What keeps people from using crypto for day-to-day transactions is their volatility.
I agree with those who advise you to fix the price with a stable coin. Of course you will not benefit from trading crypto there. Like if you peg 100 dollars with ETH then in the future the price of ETH rises, of course you as a buyer will benefit more from the volatility of cryptocurrency prices.

I do not know what they mean by the negative value you are talking about, but there is no commodity with a negative value. You can find capacity with a zero value, but the negative values are definitely in the costs of that commodity, which represents a loss, or in futures contracts.
Therefore, if there is a cryptocurrency linked to assets, its value will not be zero, but its costs will be closer to zero. These costs are not calculated with the asset.



In fact, the story is deeper than that, but in short, what happened is the date of delivery of the contract, as the announcement of COVI-19 pandemic led to the cessation of all oil transactions during the contract’s purification period, and therefore those companies refrained from buying. Against drops and the lack of suitable storage containers for it.

Read about it ----> https://www.eia.gov/todayinenergy/detail.php?id=46336#

While the general view is that while DEXs may not deal with negative prices directly, alternative approaches, such as introducing derivative tokens or using additional mechanisms, could be explored. However, it is important here to carefully analyze market dynamics and the feasibility of categorizing crypto tokens into physical goods with negative prices and to consider the regulatory and legal aspects associated with such an undertaking. Maybe the seniors here can add that to.

Currently, most DEXs might not be able to handle negative prices, as they are primarily designed to facilitate trading between positive-valued assets. However, this does not mean that it is impossible to handle negative prices in the crypto market. There could be alternative solutions, such as creating a two-token system, where one token represents the positive value of the good, and the other token represents the negative value. This way, OP can trade both tokens on DEXs while still maintaining the connection to the underlying physical good.

For you reply, I have some add point. While it is true that the crypto market allows for the creation of various tokens, and smaller DEXs might be more lenient in listing tokens, I believe it is crucial to focus on the token's utility and real-world value. Pegging a token to a physical good can bring more credibility and use cases to the token, as opposed to "pump and dump" tokens with no real value. However, it is essential to address the challenges associated with negative prices and find an appropriate solution to ensure the token's long-term success.

Yeah tokenized it can be trickier since some not all real-world things cannot be stored like the USDT, we know the CFD or contract for differences it has no real stuff only the contract we can do the trade Oil gas or even energy like I discussed earlier. Maybe we can create on futures but not the token.

What I remember Binance offer buy stock with some kind of token pegged by real shares but it looks like fail - https://www.binance.com/es-LA/feed/post/595324

This is what I thought as well, is it possible? Yes, but will it be frequent? Absolutely not. And this is why there won't be really any token pegged to real life goods, first of all that's centralization and we need to trust whoever has those goods to actually let it belong to us, after that it would be very tough to have negative prices and even on very very rare occasions when it happens, it is going to be a tough deal, it is not going to really help people out all that much.

This is why I believe that we should not be really considering a situation like this, it will not be helping people out all that much, it is just not that smart of a way to do that and would be considered a trouble on the long run, it doesn't make sense to do something so niche.

Please write u telegram. I need to ask you something.

It means a good is traded by a negative price. For example you buy 100 tons of wheat for -100 USD. This is happening a lot when guys buying "futures", but when the date of the "future" is coming and the trade is executed, the guy who bought the "future" does not have something to store the wheat. Then the costs of renting a storing space OR the cost of destroying the wheat + the fine for destroying the wheat would be higher (in this example) than 100 USD. To lower the loss those people selling for a negative price. It happens a lot with goods like power, oil and grain. There are also other possibilitys why goods can have a negative price. And of course it can happen to other goods.

(A "future" is a traded paper for making a trade in the future. So basically I make a contract with a wheat owner today, that I am trading 100 tons wheat for 100 USD on September 1st, 2024. One month later the price of wheat is increasing for 30 percent. So I sell the contract for 130 USD to another person. And on the date of the execution of the contract this person have to pay 100 USD for the 100 tons of wheat. From the wheat owner, or whoever bought his side of the contract.)

Another real life example is, a clearing company making a contract with the son to clear the house of the passed father. The contract said, they clear the house for free - but can sell the goods (like furniture, paintings, tools) in the house. So on the first visit before the contract signing they are checking out the goods inside the house to clear. Then they sign the contract. But on day 1 of the clearing, they dig a little bit deeper, and are calculating that the price od the hours of work would be higher than the price of the goods to find. So in my example they would make a 500 USD loss. So for them it is better to sell the contract to another company for a negative price - for example -100 USD to avoid a 500 USD loss. Why would another company buy that? Maybe they are working cheaper, they are better salesmen (of the goods), ect.!

This thread reminds me when COVID caused the oil crash and prices turned negative. So they basically paid you to take the oil. A few traders became millionaires that day.

Why that happened was because the demand was so low due to COVID they had nowhere to store it. And hence why the front month only was negative, the other months were positive however.

Either way, such thing is no possible with crypto.

DEXs primarily operate based on the principles of supply and demand, and negative prices are not a common phenomenon in the crypto market. As such, finding DEXs that explicitly support negative prices might be challenging. However, alternative solutions such as using derivatives or specialized platforms may offer options for addressing negative price scenarios. Consulting industry experts can help navigate the complexities and regulatory considerations involved in pegging a crypto token to a physical good with negative price dynamics.

After your post in back couple days ago and I searched on the internet that Crude oil is also minus aswell  and as far as I know, there is person grab profit from it by shorting all the way down , but they only tell it on Market I mean on the trading platform I don't know in the real world what is happening 

and btw -100 euros is huge but by looking crude oil chart that I mentioned before it only happens very fast and not last minus for long period of time

What do you mean by negative price guys? Do you mean inflation? If so, then of course it will be a risk for you. An example would be a seller selling wheat with BNB worth $10 and then some time later the BNB price will be worth $15. That is a positive price for the seller.
But that is the risk of every business. And the risk becomes even greater by making transactions on volatile coins. Prices can change quickly and that is the risk of negative prices and positive prices that we must face.

Possible, yes! Likely and often, no!
It all comes down to the cost of buying this, the cost of disposing of it or storing it, and so on, the freight tax, the port tax, a huge mess of costs that basically dictates how long it can go, but it will never go way below this as at one point it makes sense buying something that costs 20$ to store or throw away for -30$.
I don't know besides commodities with closing contract dates how this work, like in electricity trading but it must be nearly the same, the highest downward spike I've seen was around -100euros/Mwh so probably that is the limit.

That doesn't make sense with synthetic stocks/tokens. Prices go to negative when actual products like oil barrels and traders have no place to store them. Synthetic token owners would not be resposible for holding the barrels so they would only gain money by trading those tokens as they wouldn't have any legal repercussions for holding them. Physical barrel owners are not going to pay for some random token holders that are playing the markets.

This type of thing exists in real life? I mean I heard that oil was at negative price for a while, people sold at negative prices, just to get rid of it, because oil price plummeted during the pandemic and that happened for a short little while. But I do not remember too many frequent times where a seller pays to get rid of the goods, that is not really common. In a day and age where inflation is reality, let alone negative price, things do not even go down in price that's a lot more common. I am sure that this must be a rare occasion thing where it is known to happen, but not really common enough to consider building something like this, would be very very unlikely to get used. Most people will just ignore it, and the ones who are interested will not have enough capital to keep it alive.

Thanks stompix for this information this is new to me. Question so if this happens on the market with negative prices what gonna happen, is it possible the minus value even bigger than your showed images?

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Back to the thread if commodity can go negative price can tokenized crypto can go minus aswell? The Centralized EXchange with perpetual futures can do that but I don't know on regular market basis

It's easy on this market to have your own token whether it's pegged with any goods that you think are valuable, you can have it. The twist is that there have been tokens that have no pegged into a good or a use case but then they're even in exchanges mostly, the dexes.
The small dexes and exchanges aren't too strict and that's why you see most shitcoins listed there and the typical tokens there are pump and dump tokens which could be taken the same with your planned token.

Yes, and it's easy to digest where this is going. an interesting illustration depicts the unfortunate situation where a farmer has to get rid of excess milk because there is no demand. I think identical situations arise due to complex factors such as supply chain disruptions, market dynamics, and imbalances between demand and supply.

Yes, they can!


Europe two days ago!

https://aleasoft.com/weekend-negative-prices-european-electricity-markets/

Remember how oil dropped to -$37.63?
https://www.bbc.com/news/business-52350082

Here is natural gas in the US a month ago:
https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/natural-gas/041023-negative-gas-prices-return-to-permian-basin-as-overlapping-maintenance-looms

It's possible for every commodity to go negative, basically you are forced to take it which involves cost but there is simply no demand for it so you end up paying for worthless stuff, for wheat and for other cereals it's harder because the cost is quite low and both US and Eu have enormous cheap storage capacities, but for other countries during harvest season prices are going so low an overproduction could make them just leave the fields like it is. Remember how farmers used to dump milk in the sewer because there is no demand for it?

This isn't a real world problem. This is a tokenomics problem. And this isn't even worth dealing with. I remember the days when tokenization was a hype. There were tokens for everything, even for a banana. All of them must have died already.

I'm curious, where are you in the world that electricity and wheat have negative prices? And with your definition of a negative price, people must be consuming as much electricity and wheat as possible because they will get paid for it. This is ridiculous!

the question is can wheat and electricity have a negative price? and what do u mean by negative price.

The token can be pegged to everything I would say from stock to commodity it basically almost the same instrument that uses candlestick too hahaha. Right now there is dozen of Pegged to real world things like USD, EUR, CNY, IDR and commodity like gold and silver.

Bro. You can give your telegram for communication, or write to me  There is a proposal for cryptocurrency.

If demand for stablecoins drops suddenly and investors begin to sell off their holdings, it can be difficult to quickly liquidate the underlying commodity to maintain the stablecoin's fixed value. So why is that important for stablecoin issuers? They want to carefully manage their reserves of the underlying commodity and have a plan in place to manage price fluctuations and sudden changes in demand. There is also the potential for market manipulation or other forms of fraud.

Liquidity of your token to back up the pegged value play an important role to avoid negative price. You should offer only a token supply that is equally backed 1:1 to the value of the goods that you want to pegged.

I’m curious on you will manage to secure the goods that backed your token? Typically, Fiat and precious metal is being used to backed crypto because it has a global fixed value while electricity, wheats and other goods have different value based on the country you originated. Also there’s a shelf life on goods.

Can you share your whitepaper?

Commodities aka real goods are difficult to liquidate so that if the token has any problem with the price then selling those commodities will take time, this time is very valuable and investors will not wait until you sell the commodities and give them your money.
Also, when such a problem occurs, you become exposed in the market because you are forced to sell your goods, and therefore no one will buy them, because you will try to sell them in the fastest way, and therefore they will try to lower the price for you.

This is if we ignore the manipulation that can occur and the promise of the ability to verify pegged.

take a look at how stablecoins work,, you can see that 1 USDT is equivalent to 1 USD because it is backed by 1 USD which can be proven and audited.

you can just pegged crypto tokens to wheat, for example 1 TG is equivalent to 1 gram of wheat and it must be proven and audited by a professional team, but it seems that it will make it complicated for you.

No, I can't think of DEX crypto markets accepting tokens with a negative price. I guess that the only way for a "negative price" to occur on a crypto market would be one trader borrowing a token from another trader and paying him later(which isn't allowed on the crypto markets). Otherwise, there's no way for financial assets to have negative prices, like some commodities. Why do you want to peg a crypto token with a physical good or commodity? I can't find any reason for this. Do you want to create a stablecoin, which is pegged to electricity prices? This ain't gonna work, the price of electricity can be very volatile sometimes.

Maybe it is possible with some kind of second layer. F.E. having a coin for the trading and a token of this coin for the "service of taking". I have to think about it.

Electricity is a big market with negative prices.

Edit:

I mean we have a simular problem with NIKE shoes. I buy shoes to wear them. But I take money to wear clothings with commercials on it.

The only one that I know of is gold backed coins like PAXG, but which I have only seen on spot market and on some centralized exchanges. If you want to create yours, you can try it, but if people do not go for the idea and buy such coin, it will only be a shit coin. There are many assets and commodities that are tokenized, but most of them are found on commodity trading sites.

I think he only means that for people to be able to sell which can make its price to fall.

Yes, no coin pegged with crude oil. I which it is tokenized but I did not see anything like that yet.

I don't think it's possible, negative price only happen on perpetual trading. While DEX is just a like a spot trade in CEX, the lowest price is $0. I think you're want to take advantage by making money by buying a coin which pegged with a real goods where the value is negative lol.

I remembered if crude oil price was negative during the pandemic, but there's no crypto or asset that pegged with crude oil price.

A negative price is: I take a sack of wheat from the seller and get 10 USD for the taking from the seller.

What's your own actual definition of negative price" and "positive price"?
I explain the two to myself as Negative price is the time when the price of a particular product goes sideways and it's not in my favor, and positive price is when the price is going in my favor. It can either be if I want to buy a particular product and the price starts to drop.

To others who want to sell it, it's negative to them, but to me who want to buy it's positive to me. If this is also the same way you define negativity, then you don't really need to worry about which dex is to accommodate your token. Dex don't actually regulate price, so they don't care if it's on the negative or positive side. Let there just be buyer and seller, and their fee will keep on flowing in. Dex choice will be dependent on your preferred network on which you want to launch your token or coin.

I am stucked on a real world problem.

I want to peg a crypto token/coin on a physical existing good like electricity or wheat. And I want to trade this coin/token on DEX's. So there are negative prices on these goods. Are there DEX's which can handle negative prices?

Are there other possibility in handling negative prices on the crypto market?