The Coming STEEM DOLLAR Purge : Why it Needs to Happen and How

2년 전

People hate hearing bad news but sometimes you need to take the rose coloured glasses off and have a good hard look at the glaring truth. Reality has a way of kicking you in the teeth if you’re not paying attention and if this developing Bear Market in Crypto-land only teaches people one thing it is this – Markets may get carried away at times and price things wrong, but they will ALWAYS correct in the long run. The STEEM DOLLAR is no different.

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I have a history of making unpopular predictions and that is not about to change. Just over 2 months ago I predicted the STEEM DOLLAR Will Fall To $1 USD and at the time it was trading above $7 USD. I explained my reasoning and backed it up with some facts about how the Circulating Supply of SBD was exploding and it was becoming Hyperinflationary. I stand by all that and now that it’s dropped under $2 (a fall of over 70%) maybe people are prepared to start listening. But maybe not. The SBD is still defying gravity and we are still expanding the Circulating Supply with negligible Conversions back to STEEM.

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Remember this chart shows the SBD Created and Destroyed PER DAY so we are still in a pretty bad place with an unsustainable inflation rate. We’ve started to see post rewards get paid out in liquid STEEM, which is the platform trying to adjust to the high Circulating Supply of SBD by printing more liquid STEEM instead of so much SBD. This is not a good thing and if we continue on this course SBD will become even less relevant as a post reward in future – eventually fading into total irrelevance. Even the authors (and witnesses) who have been cheering the high SBD price won’t want to see this. Maybe they’re starting to figure out what road we’re on. Maybe not.

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We’re not quite back to SBD $1 yet, but we are well on our way. I have been thinking about what might happen once we reach $1 and how things might play out. The market seems to have decided that SBD is loosely pegged, not to the USD but to STEEM itself. We have seen STEEM and SBD moving almost in tandem for months now. It is totally illogical to be pricing the market this way, but I think we’ve already established the market has been getting it wrong for months now so I am no longer surprised. The question is, how will the market finally correct and what does it look like? I’ve broken it up into 3 distinct phases.


Phase 1 – The Drop

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This phase is nearing the end now and has been helped along the way by the broader sell-off in Cryptos, but it’s not done just yet. I would say this phase ends when SBD hits $1 but it is not entirely true. The smart money will be putting a Buy Wall up at $1 for SBD so it is quite likely to initially bounce off this level. All those “Geniuses” out there using Elliot Wave Theory and other Technical Analysis voodoo will probably see the $1 level as a strong support level so it might bounce off $1 a few times before finally breaking through to the next phase.


Phase 2 – The Purge

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When the $1 Buy Wall finally breaks, the Geniuses in the room using TA will probably see this as a very bearish indicator and a break-out on the downside. They will start selling, but as soon as the price gets to $0.99 or below there is a new dynamic that will be at play. Arbitrage players will be able to buy SBD at 0.99 and convert it to $1 worth of STEEM. They will then be able to sell the STEEM for a 1% profit and buy more SBD at 0.99. This is the way the peg is supposed to work. The result of this is that SBDs are finally being DESTROYED by the Blockchain Conversion. The SBD price is being supported by the Arbitrage players and the STEEM price has DOWNWARD pressure due to the Arbitrage selling. This is the point where the market realises that STEEM and SBD are NOT pegged to each other. It is also the point where all the excess Circulating Supply of SBD is Purged and we go back to how things were back in November – before all this madness began. The big question, and I mean HUGE question, is whether this is also the point where the SBD Peg is fixed to have Bi-Directional Conversions so that this problem does not repeat. That is ultimately going to be for the Witnesses to decide and I’m not particularly optimistic.


Phase 3 – The Recovery

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After the Purge has occurred we should see the SBD Circulating Supply normalised, the liquid STEEM post rewards we’ve started seeing should be gone and the STEEM price will probably be looking battered. We may see the Peg fixed, but regardless – after this little hangover wears off, STEEM should start to recover. Maybe the SBD will start to pump again and we will rinse and repeat this cycle. Maybe the Peg will be fixed and as confidence returns to STEEM we see a reverse of the Purge dynamic occur. The dumb money might start pumping SBD above $1.01 and the Arbitrage players will Buy STEEM, convert it to SBD and Sell SBD…then use the proceeds to Buy more STEEM. This dynamic would keep a lid on the SBD and give us that promised Stable Coin (that could attract the Starbucks of this world), while putting a rocket under the STEEM price from all the buy pressure being channelled into STEEM.


In summary, the Purge is likely to happen regardless of what people want but the big decision is whether to fix the Peg when it does happen. I personally have some cash on the sidelines and I’ll be putting some into this platform one way or the other once the Purge occurs. If the Peg doesn’t get fixed I’ll be stocking up on SBD at $1 and waiting for the next stupid SBD pump and the launch of STEEM 2.0 on EOS…or if it does get fixed I’ll be loading up on STEEM during the lows of the Purge and then riding it to the moon.

What will you be doing during the Purge?


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I did not read it entirely yet, but I do believe that the "destroyed" SBD may resurface when a person that has the key of the null account decides to pull it from there.
I have already seen that the @promoted account got undelegated by some person whom is not even an insider, and the surest thing is that usage of the 'PROMOTE' option is very wrong, regardless of what your goal is, even if your goal is to increase the value of SBD.

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Sorry for the late reply but I just saw this.

FYI, the @null account is a special system account and it has no key. Furthermore any coins sent there are immediately destroyed (which is why the account always has a zero balance). So it isn't possible for coins sent there to "resurface" ever.

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You got a 47.24% upvote from @luckyvotes courtesy of @stimialiti!

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You got a 40.00% upvote from @sleeplesswhale courtesy of @stimialiti!

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This comment has received a 100.00 % upvote from @steemdiffuser thanks to: @stimialiti.

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You are absolutely right @buggedout. This is going to happen with steem and SBD. But it will take months.

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It will depend on the broader Crypto market. One more panic selloff through Bitcoin 6,000 and we could be there in a hurry. That could happen in the next week or 2.

Nice post Buggedout. lots to think about, especially if eeosa launch their own version of Steem.

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Thanks. It is definitely a possibility!

The big question, and I mean HUGE question, is whether this is also the point where the SBD Peg is fixed to have Bi-Directional Conversions so that this problem does not repeat. That is ultimately going to be for the Witnesses to decide and I’m not particularly optimistic.

Reverse convert and convert for SBD and STEEM to peg SBD to 1 USD.

Covert process- if SBD is less than 1USD, it can be converted to 1USD equivalent of STEEM, conversely, if SBD is above 1 USD, then STEEM can be converted to USD equivalent of SBD.

For example, if STEEM is $4, then when SBD is below $1, it can be converted to 0.25 STEEM while SBD is above $1, STEEM can be converted 4 SBD.

I am confused about supply souce of both SBD and STEEM- where they will come form. If somebody can explain the supply source of both "SBD and STEEM" in this convert scenario, it will be helpful.

However, it will definitely peg SBD to 1 USD. There is a market demand for 1 USD pegged stable currecny such as Tether, TrueUSD or NuBit, most importantly, it will be helpful in future internal exchange for SMTs due to its stable value.

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At the end of the day Blockchain technology is just a "Public Ledger" so when you convert from one to the other you are just creating one and destroying the other by changing numbers on the ledger. It's part of the code. Just like you create STEEM when you mine a block, you create STEEM (and destroy SBD) when you convert SBD to STEEM using the code.

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Thanks.

However, the question was how the automated SBD/STEEM creation/destruction are kept on par with fixed yearly inflation rate. If SBD/STEEM are created for conversion purpose for supply and demand, it can a case where abundance of STEEM if SBD's demand remains high.

However, STEEM supply is kept to a fixed rate (i.e. with 0.5% decreasing rate per year, currently at 9%). Is that emission/creation or burn/destruction of both STEEM and SBD due to conversion will be on per with inflation rate.

What happens to fixed inflation process if more STEEM/SBD are created on conversion process? Or, effects (e.g. slight increase or decrease) are negligible to fixed rate of inflation.

Currently, more liquid STEEM are created since SBD (i.e. 1USD pegged SBD) ratio of STEEM market supply crossed 2.5%, at 5% SBD production will be stopped.

What understand total reward pool (both SBD and STEEM) is generated on the base of inflation rate.

Very well written, first piece of analysis on crypto i could really understand. Bravo

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Thanks. I am glad that it made sense.

This is so well written. You managed to make something complex underatandable to me. I struggle to follow these types of posts usually but yours makes perfect sense. Thank you.

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You are very welcome. These are my favourite comments as I am very happy my post made sense :)

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It made complete sense. For a crypto dyslexic like me that is quite an achievement

Well written, I have not thought of the mechnics of steem/SBD for a long time being distracted with other things. This seems like it would be a sensible cycle as I see it and I think it'll be a repetitive cycle as I think those in it for money will want a predictable and long term cycle of profit to grind earnings from the smaller fries, though I am cynical on investors.

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I am a bit cynical myself, but some of the witnesses are very clever people and they might have the vision needed to take us forward. It'll take some decent political fortitude though and it'll be easier for them to deliberate, debate and do nothing.

Very well written. My uninformed, newbie predictions as I've been learning about all of this over the past few months have been somewhat parallel to yours; although not nearly as concise. I think that in the end we will get that stable coin, and things will be good for us here now. Thanks for this article, it was a good read and helped further my understanding of what's possibly to come :)

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Thank you. I hope you're right because we don't get mainstream adoption of Crypto without a stable coin and with the advantage of the social and network effect of STEEM it's a no-brainer that the SBD really could be IT. I saw it 6 months ago when I wrote Found : The Crypto for mainstream adoption but since then we've blown it.

the Geniuses in the room using TA will probably see this as a very bearish indicator and a break-out on the downside.

Wait you mean the overpaid highest paid Crypto Guru on Steemit isn't using factual data to support all his highly thought out well written posts...crap no wonder I lost my house, car, retirement fund, kids college tuition's, and had to sell a kidney listening to his advice.

Like you thoughts, but don't see it getting back to $1 personally. The demand due to the bots will keep it bolstered about the intended $1 target. If you close the bots down SBD drops 50% in less then a week.

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LOL. I am going to take that as a joke. I don't think anyone who follows He-Who-I-Will-Not-Name would be smart enough to own a house, car and all that stuff in the first place.

It is a good point you make about the bots. Maybe I'll have a look at the SBD circulating through the bot economy to see if we actually do need a high Circulating Supply. A lot of them are accepting STEEM now so I am not convinced we need SBD for that.

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Most will take steem, but if you look at the bids most bidders are still using SBD. Just because it's not "needed" doesn't mean people won't want to use it for simplicity. You earn SBD from your posts so it's easier to bid with it and keep track of profits/losses per post when the amount paid and earned is in the same currency.

And naturally it was a joke...lol

So, prices are falling on SBD, steem is going to be cheaper to buy, is all I got out of this post, the rest I don't understand. By that I mean the why it's going to be cheaper. Where is the buying steem and sbd for dummies book at? hell, I'll take the Cliff-notes version of it, oh wait, sorry, That shite got "mandela effected"
I mean the "cliffs notes" version of it.

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Have a read of my post STEEM DOLLAR Will Fall To $1 USD : Here's Why it explains the Hyperinflation of the SBD.

Most countries economies have collapsed when their currencies become Hyperinflationary. Venezuela, Zimbabwe, Weimar Republic are 3 famous examples.

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Not yet but I will do, thanks for that link, I know that hyperinflation ruins currencies. I used to visit Mexico when I was young. Plus I have seen all of those African Billionaires. I'll will read it though.
Thank you I'll have to keep coming back for more info.

I will probably not be noticing the purge til the rest of you are chatting about it because I'm oblivious like that :)

goatsig

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That could be a good way to be. It is likely to be a painful and stressful time for lots of invested Steemians so if you can bypass that then good for you!

What will you be doing during the Purge?

  • I will be stocking all of my SBD's on a long run, waiting for the next SBD bull run and then trade them for Steem to power up. I think hodling SBD's atm is the best option.
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Good luck!

Well for the sake of SBD lets let it hit $1 as it was intended to be.

I'll be here, and don't plan to hold many SBDs at all - almost everything has been powered up these last few months.

We are yet to have this scenario of SBD/STEEM falling from a height - I guess we'll have to see how the code reacts as SBDs approach 1$.

It was interesting to read your old post again, especially the top comment :)

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Thanks. I have been powering up my post earnings too. There is no way to tell when this happens so we just have to be ready for it and roll with those punches :)

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Yes indeed. I'm ready!

I think SBD was supposed to be $1.00 worth so it's not surprising if that happens because that's the purpose of it supposedly. I don't think this is not a bad news in a way. It's just normal.

remember that everything has a slump, financial fall surprising at some time because of unpredictable external factors such as the wall street and the oil, habeces the arrival of another system to the market disables or imclusive replaces said means so to speak

There are 2 possibilities:

  1. (Your version) SBD-Buyers are idiots for buying SBD above the convertible real value, overpaying for nothing.
  2. They know something we do not know that implies a higher value of SBD's and could explain the peg to Steem for the last few months.

Seeing those big volumes of a 100 million USD traded in SBD makes me think that those players must know what they are doing. I still do not understand their reasoning.... There might be an explanation, but it is pure speculation... I wrote about this possibility:

https://steemit.com/smart/@mexbit/this-might-be-the-reason-why-a-sbd-is-13-usd-worth

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I've been wrong before and I'll be wrong again. I have heard the SMT theory driving SBDs but I just don't think it holds up. If SMTs become inaccessible due to SBD scarcity and/or price then it will be totally counter-productive for the platform. I just don't see it.

Great article. It seems that while I was ranting, you were putting together a gameplan for what is going to happen next. I was half-expecting to see the price of SBD had fallen this morning, but it's back over $2. People just don't get it. That's ok though, like you said, it's going to happen eventually.

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We just need to be patient and be ready. If/when the purge occurs, STEEM is going to need all the support in the market it can get and I do believe those that support it during the dark times of the purge will be rewarded with a bargain-basement fire sale price.

I lost you at: when steem2.0 launch on EOS. Where did you get this idea?

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Hehe. Sorry about that. It was a bit of a speculative and controversial dig :)

There has recently been a quite public spat between Ned and Dan where there has been comments made about a STEEM 2.0 (a competitor) being launched on EOS when it comes out. It is a purely speculative comment, but that’s what I am doing here – Speculating.

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Now I see.You meant a competitor of them on EOS. I know about that. But probably they'll use a different name, not steem.

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Yes, of course. I just called it STEEM 2.0 as a metaphor in the absence of any chosen name for it.

Thank you for this, this is hammering home the reminder that I need to get back onto the research I started a while ago into the fundamentals of the underlying steem currency... too many distractions though....

I'm in agreement with your assessment of the SBD peg situation and I appreciate you walking through the stages you see happening to finally right the ship.

It would be nice for this to happen sooner than later, so we can realistically get to the point of on boarding the businesses.

If the market has essentially been using the SBD as a pump, though, what keeps that from happening? More witnesses than five or six adjusting their feed prices? Something happening on the STEEM blockchain, like hivemind and communities? SMTs?

It seems like Steemit could be poised for a very big year if all of those things I've listed along with HF20 come to fruition. Which means STEEM will be poised to rise, too.

So, the question is, what finally makes STEEM more attractive to investors than SBD, and what can be done to make it happen?

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Sooner is definitely better than later so that we don't squander our first mover advantage.

If there is a Bi-Directional conversion of SBD <-> STEEM then market forces will keep the SBD from pumping like it has.

"So, the question is, what finally makes STEEM more attractive to investors than SBD, and what can be done to make it happen?"

The market needs to get educated. Maybe the Purge I have described will wake a few up enough that they'll read the whitepaper. Once the market realises that STEEM is Equity and SBD is Debt I think it might start to value STEEM more as the better long term investment.

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So, education then. Well, it makes sense to me. Sounds like we might need some kind of marketing budget or paid PR person to run around quoting from the whitepaper.

Maybe a gig for you? :)

There are supposed to be some STEEM ambassadors right? And I keep reading about witnesses meeting with business folk. How about the investor community?

I'm wondering though, if these spikes aren't actually closer to home, with people who know exactly what they're doing. That makes me nervous to think of, even though I have no evidence one way or the other. Just my own straight up paranoia and lack of logical explanations for things that don't make sense otherwise.

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I'm not much of a marketing guy. I'm more of a "piss everybody off with bad news" kind of guy :)

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Well, it's appreciated, even though I would prefer the term "Dose of actual reality guy" since people don't seem to like reality the way it is and keep trying to turn it into something that it's if not downplay it or ignore it entirely.

"Don't worry. That will never happen." Says the guy just before it happens.

But you can refer to yourself however you like. :)

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My apologies, I really should not be so crass. "Dose of actual reality guy" sounds a lot better, thanks :)

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No worries. Seriously. Wasn't even thinking about crassness. I was just going for the positive side of what you said, which is, everyone needs a clue and you give them it. :)

So the problem is we should be converting SBD to steem? Do you have a post as to how you see the market for this should be looking like, and why are you delegating most of your steem? Maybe I'm asking too many questions, I can go look at your posts and read them. But if you do have a post that explains what I have asked here, A link would be appreciated.
thanks

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I am delegating most of my STEEM POWER to communities and initiatives that I support. That is not really relevant to this topic though.

I don't have a post explaining it all. My advice would only be not to HODL any SBDs and to keep some spare cash on hand and be ready to support STEEM and the platform when the purge is occurring.

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So I guess my initial Convert all SBD to Steem and Power Up my account was a good plan and idea huh?
Thank you.

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It is what I am doing myself. Not sure if it's a good plan if STEEM is going to get battered like I'm predicting but I might be wrong about all this :)

good analysis - I reckon we where all better off when SBD was worth much more , but I don't understand the big picture and seems you do . Anyway if it makes a $1- I will buy a couple of thousand and take the gamble on a future price above that .

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Keep some dry powder on hand. Good move ;)

Thank you for your continued support of SteemSilverGold

That is a fantastic post and a very good read befor ei head off to work on this fine day.

Thank you sir