Why is SBD well below USD?

11개월 전

The crypto sales have also affected STEEM. But why the hell is SBD falling well below the value of one dollar? That’s the question for today.


SBD = USD... or not?


You may have noticed that there is a possibility to convert SBD to STEEM in a rate as if the SBD was equal to the US dollar. If STEEM is equal to 0.5 USD, you would get about 2 STEEMs per converted SBD. However, the thing is, that it is not always possible to convert SBD to STEEM in the above-mentioned ratio.

Well, to explain it in a more comprehensible way... imagine that there are 100 STEEMs and 100 SBDs in the whole (some imaginary) blockchain. In total, the value of all tokens is, for example, 200 USD. What will happen if the real value of the entire network drops from 200 USD to 20 USD? You have 100 tokens and in the network there is a guarantee that through conversion you can create STEEMs worth of 1 dollar from a single SBD. That means that it would be extremely profitable to convert your SBDs to STEEM. Of course, this would probably be done by all users (some would sell their SBDs making it even more profitable to convert to STEEM). But the result would be that during a 3.5 day conversion, STEEM would fall so much that you would only get a fraction of the 1 USD value. After that, the STEEM may fall so significantly that you would be able to get billions of STEEMs per conversion and thus a beautiful hyperinflation would be here.

(Of course, the credibility of the entire network would plummet so you would probably get nothing from the conversion, but I ignored that in that example)

That’s why we have a special rule in the blockchain in a form I did not know about before (perhaps because such situation has not yet happened).


This is a screenshot from https://steemworld.org. You probably know that. Interestingly, the Internal Median Price (“IMP”) somehow does not go down... even though the STEEM price is well below 0.4018 USD for more than a week. IMP is determined by the feeds of witnesses and it is the median STEEM price of last 5 days; but why did it not go down? The reason is that there is the SBD Debt Ratio, which is the ratio of the SBD token value (always 1 USD x amount of SBD) to the total value of all tokens (value of all STEEMs + value of all SBDs). The maximum value is set to 1:10 (10%). And because the maximum has already been reached and we do not want to be in the situation which I described above, the minimal IMP is set so the SBD Debt Ratio is at most 10%. Thus:
VIRTUAL SUPPLY (= all the value expressed in STEEM → Amount of SBDs/IMP + Amount of STEEMs) × IMP10 × Amount of SBD tokens

Since the IMP is artificially modified, then its value is much higher than the real value of STEEM. The rate of SBD conversions depends on the IMP. This means that if we convert 1 SBD now, we will get STEEMs of about 0.604 USD... that is AMOUNT OF CONVERTED SBD × (ACTUAL PRICE OF STEEM ON AN EXCHANGE / IMP). That is the real value of SBD, if we only determine it by the current conversion option and do not expect anything from the future. Therefore, there is now a problem with SBD and even in this situation it is not so profitable to buy and convert SBDs to STEEMs.

The side effect of artificially elevated IMP is that the values of articles are also increased, as it counts with IMP and not with the real value of STEEM (it may vary depending on the platform you use – but I do not know any that would count with the price on an exchange). That is also why I recommend paying a great attention to the upvote bots, because the real value of the upvote may be much lower than the boost service suppose. In many cases it is about 40% (1 - Real price of STEEM / IMP) lower. So before you send money anywhere, you should rather calculate the payout from previous upvotes the bot gave others.

What should we do with that?

I see the only organic solution in waiting for the correction. Only a rise of STEEM price may cause the SBD to go up a bit higher. You may think that keeping SBD is advantageous because it will be near the value of one dollar somewhere in the future, but such thinking is wrong: The SBD price will correlate with the STEEM price increase, as its real value is (as I already mentioned) expressed as Real price of STEEM / IMP. The only difference between SBD and STEEM is that the SBD real value will for sure stop at 1 USD... when the SBD Debt Ratio will decrease (IMP increase).

Another solution may be the intervention of witnesses. They can, for example, increase the Maximum SBD Debt Ratio. However, this way of solving the problem seems to me to be quite violent, because, of course, it will cause the need for the Hard Fork and in addition it will cause the SBD price to go sharply up, which will cause an increased number of conversions to STEEM so larger amount of STEEMs will be emitted and it will decrease the STEEM value. In addition, more SBDs in the network will cause a greater vulnerability to this problem; only a small fall of STEEM would be able to decrease the SBD value also.

Or maybe developers will come up with something else that I cannot imagine. Who knows...


I would like to add that I am just observing. I am not an expert. So if you found any mistakes, please correct me. Thank you. :)

Authors get paid when people like you upvote their post.
If you enjoyed what you read here, create your account today and start earning FREE STEEM!
STEEMKR.COM IS SPONSORED BY
ADVERTISEMENT
Sort Order:  trending

Therefore, there is now a problem with SBD and even in this situation it is not so profitable to buy and convert SBDs to STEEMs

You can still profitably buy and convert SBD into STEEM if you can buy it for less than about 64c (conversion rate at time of writing, ignoring future price and supply changes, etc.)

The side effect of artificially elevated IMP is that the values of articles are also increased, as it counts with IMP and not with the real value of STEEM (it may vary depending on the platform you use

This is an unintended UI bug with steemit.com and is being investigated. Some of the other UIs are working on correcting it as well.

Another solution may be the intervention of witnesses. They can, for example, increase the Maximum SBD Debt Ratio

This would not be advisable at this time. The maximum ratio was put in place for a reason, which is to prevent enormous unstable dilution of STEEM as its price undergoes extreme declines (which is what we have seen). The flip side is that holders of SBD need to be aware that they too are not immune from extreme bear markets. They can count on a secure stable (at least minimum) value for day to day purposes but must also accept the risk of some losses if Steem's value crashes.

·

Thank you for your response.

You can still profitably buy and convert SBD into STEEM if you can buy it for less than about 64c (conversion rate at time of writing, ignoring future price and supply changes, etc.)

It was meant in the way that you will not get STEEMs worth of 1 USD for 1 SBD. You can profitably convert, but you will most likely get less than 5% more than what you would get by selling. Market principles are still functioning and if it is very profitable to convert, some people will convert making it less profitable for slower ones. So it is pointless for minnows to convert. That's what I was trying to say. But it is true that for some whales, (for example) 3% profit may be a lot.

If REAL STEEM PRICE / IMP > PRICE OF SBD, then it is profitable to convert.

This is an unintended UI bug with steemit.com and is being investigated. Some of the other UIs are working on correcting it as well.

However, it must be caused by the higher IMP price. Take this article as an example.

109$ is shown. If you multiply it by the Real Steem Price (0.258) and divide by the IMP (0.4) you will get slightly more than 70$. And that is the real price of the payout of the article... let's count the payout. 99.3*2 (author) + 64 (curators) + 5 (beneficiary - I know that there is written 2.5, but Steemworld does not show beneficiary reward in liquid tokens, but @steeveapp will get 2.5 SP + 2.5 STEEMs). The result is 267.6 STEEMs. Multiplied by 0.259 you get again 70$.

This would not be advisable at this time. The maximum ratio was put in place for a reason, which is to prevent enormous unstable dilution of STEEM as its price undergoes extreme declines (which is what we have seen). The flip side is that holders of SBD need to be aware that they too are not immune from extreme bear markets. They can count on a secure stable (at least minimum) value for day to day purposes but must also accept the risk of some losses if Steem's value crashes.

Yes, that is why I wrote about an imaginary situation when there is no SBD Debt Ratio and bigger dump happens. I do not want to increase the maximum of SBD debt ratio either. As I have already written in the article, it would only make the whole blockchain more vulnerable, because a smaller Steem's value crash would be able to dump SBD (in case when SBD Debt Ratio is near the maximum). If there is no maximum, then a bigger dump can kill the whole Steemit.

So I see a solution just in an organic way; waiting for a price increase.

·
·

You can profitably convert, but you will most likely get less than 5% more than what you would get by selling

Sure, but that's typical at $1 as well. Market prices will flucutate but generally only with a small range of "fair value".

However, it must be caused by the higher IMP price

The code was changed some time ago to use the most recent witness update (a reasonable estimate of true market value, albeit up to an hour delayed) instead. However, this isn't working and it isn't clear why. That is being investigated.

So I see a solution just in an organic way; waiting for a price increase.

Both a STEEM price increase as well as declining SBD supply due to conversions could result in recovery. Most likely the outcome will be some combination, although as discussed above, a STEEM price increase isn't actually required. It does need to stop crashing though.

·
·
·

Both a STEEM price increase as well as declining SBD supply due to conversions could result in recovery. Most likely the outcome will be some combination, although as discussed above, a STEEM price increase isn't actually required. It does need to stop crashing though.

Yeah. Now I see it more clearly.

So if I am not mistaken, if I believe in a price correction, then it is probably better to hold STEEM (if the price does not stop right at the minimal IMP). If a price correction is not going to happen and the STEEM price is going to stay where it is, then the SBD will subsequently reach USD in some time. So SBD is now something like BFX coin after hack. :)

I see investor and whales leaving steemit for pinning down SBD to USD which is not favorable to the investor/traders and we see that SBD is not a Steem Back Dollar, now not a dollar. Witness should worry when SBD is below a Dollar but what they did is forcing SBD to be pinned down to dollar and result is disaster. Most of Steemit Whales don't know much how the traders affect much of steemit value assuming they understand the market knowing they don't even give the value of SBD.

Now, I see this witness already sold there shares! pity for holding back!

·

Even if witnesses will not come up with a solution how to fix SBD, it will to a certain extent fix itself. In the future, when the IMP will rise again, I believe it will be dangerous for traders to hold SBD when the SBD Debt is near 10% and it will be better for them just to sold SBD, thus making it profitable for others to convert to STEEM. I did not know about the feature that the minimum IMP can be set. Now people know and they will pay greater attention to what they hold. But maybe the minimum IMP will not be exceeded in near future, as the credibility fell down really hard. And it is not just about the SBD. There were more situation when the investors cried and I probably do not have to name them for you, because it is not so far in the past.

·
·

SBD is designed to recover (back to $1) from this situation as long as Steem doesn't fall to zero, but it is a process that will take some time. How much time no one can know.

·
·
·

I think the only things that help SBD to recover, are the inflation and burning. That's the only two processes that helps SBD (if we do not count with an increase in investing which may not happen) to go back to 1 USD.

But the first process - inflation - must be combined with investing, because when you create tokens out of thin air, it will (at least in the long-term) affect the whole ecosystem, as newly emitted tokens decrease their value. So basically, we can only count with burning that helps SBD.

·
·
·
·

Conversion is the method. Since none (due to a bug, in fact a little, but it is probably not significant) is being created, as SBD is destroyed by conversions its supply declines and eventually it will get to the point it is repegged at $1.

You are correct that inflation doesn't assure anything. It might result in an increased, decreased, or unchanged total value, depending on market conditions.

·
·
·
·
·

Oh, I totally forget to that option, although a few days ago I even converted some SBDs. Thank you for your time and shared knowledge. :)

To listen to the audio version of this article click on the play image.

Brought to you by @tts. If you find it useful please consider upvoting this reply.

The way it’s dropping I could see it go below 10 cents!

·

Yeah, anything may happen at this point.
SBD price is dependent on STEEM and STEEM price is indirectly dependent on BTC. I should mention that many technical analysises see the possibility of a flashcrash when BTC goes to 1000 - 2000 USD range (with an immediate correction as a response). If that happens, there will be blood everywhere. If BTC does well, I don't think STEEM together with SBD would go much down. The STEEM blockchain has a value, in my opinion.

·
·

Perfect time to stack up steem and power up!

Posted using Partiko Android

Like all of the other cryptos, the price of SBD and Steem is affected by speculation, and the emotions that are usually associated. In a raging bull and bear (like the past months) market, rational thinking goes out the window. When people fear their portfolio might drop further, they will sell and thereby depressing the price even more.

But there will come the time when only the (very) strong holders remain - the legendary "bottom". Unfortunately we won't know when this is for it will only be shown after the fact. With this platform of Steemit, there's value; which lends support to SBD and Steem. This is so unlike most of the other cryptos where things "are in the works" (or so the ICO proponents claim). Things are very gloomy right now but I believe there's a future for Steemit and the associated tokens.

·

Well said. I can only agree. :)

Thank you for trying to explain the inexplicable... Or rather, at least for me, the unintelligible.

Greetings from Venezuela ;-)

·

I know many people who assumed that next crypto sales are going to happen. Some of them bought SBD, because at that time the credibility of Tether went down and they were afraid of losing money. However, the SBD turned out to be a bad choice. I have to admit that I really did not know about this feature that the minimum IMP could be set. That is why it was obligatory for me to find out why is this happening and to write an article about it.

You are from Venezuela? That socialist paradise? I am so jealousy... not many people are so lucky to have a chance to live there. Hehe... just kidding. I just hope you are not much affected by that socialist tyrany. :/

My advice is to continue to buy Steem $ even if its just a few dollars and continue to built on it. That is what I am doing and I will never capitulate and sell cheap. U5drx_NFe_Q4_Nn_YGEb9rq2_V47_X6_Yk_AQsm.gif

·

From BTC technical analysis, it does not look much bearish right now. Let's hope we are right and crypto won't fall so heavily in the near future. :)

·
·

Is it good to hold SBD token or good to change to steem i need your advice

·
·
·

That is a hard question. It depends if you believe more in a STEEM price correction or not. For now percentual changes in STEEM will be approximately equal to percentual changes of SBD. If STEEM exceeds minimal IMP soon, it is better to go for STEEM. If it does not, it is better to stay in SBD, as burning and conversions will favor this token.

If the STEEM price stops at the minimal IMP, then it does not matter if you are in STEEM or SBD.

·
·
·
·

Ok thanks for your kinda advice and suggsstion

·
·
·
·
·

From what I have found out from smooth, I would rather stay in SBD. If the STEEM ecosystem does not collapse entirely, it should recover in some time.

·
·
·
·
·
·

Ok, i will hold SBD token in my wallet then. Thanks very much for your response have been having a dilema on what next to do about the SBD ,but your response give me joy that sbd still have value despite the fact the printing out of sbd from post payout is kinda of low to steem token reward.Lest i forget i don't know if you a have heard of whaleshares.io you can check it out

·
·
·
·
·
·
·

Copy & Pasted STEEM. There are actually a lot of these and I would not trust any of them. :/

Congratulations @samotonakatoshi!
Your post was mentioned in the Steem Hit Parade in the following category:

  • Pending payout - Ranked 6 with $ 108,93

Howdy!
I've upvoted your post
it's just a small upvote, but I hope it will serve to help you and the steem community to grow ;)

What do you really think is the best option right now? Power up 100%? Some people are moving to that direction but i don't see why, i mean what's the point in powering up if the price of steem keeps falling? The power down takes 7 days and steem just going down

·

I would publish more, as it is easier to gain STEEM tokens. Powering Up 100% may help you only theoretically, because there is a bug because of which you get ~0.1% in Sbd (which is actually less valuable and the blockchain does not count with that). But practically, it is pointless. Your rewards will be approx the same.

The thing also is, that there is no guarantee if STEEM is still crashing or not. I would say that the bear went already away. But that is just a speculation. Anything may happen and anything may turn out to be a good choice actually. I hope and think that hodling Steem or Sbd may be quite profitable even in short-term.

We printed way too much SBD during the bull run and now the chickens have come home to roost. The problem with SBD is that it's value doesn't fall fast enough when it's worth significantly more than $1.

By the time SBD reaches a dollar the damage has already been done because the value of Steem has also crashed just as hard. Now we have a ton of SBD debt that we can't really afford to pay back. We've already created 20% inflation in the last year. It's pretty fucked up.

One day I’ll understand what this says/means

·

You just need to want to read it. That is the only problem... it is understandable if I understands it (at least to a certain extent). Or maybe the way I have written it is so bad that you cannot understand it. Sorry if it is the second option :/ :D

Sneaky-Ninja-Throwing-Coin 125px.jpg
Defended (37.50%)
Summoned by @samotonakatoshi
Sneaky Ninja supports @youarehope and @tarc with a percentage of all bids.
Everything You Need To Know About Sneaky Ninja


woosh

@samotonakatoshi purchased a 88.02% vote from @promobot on this post.

*If you disagree with the reward or content of this post you can purchase a reversal of this vote by using our curation interface http://promovotes.com

Congratulations @samotonakatoshi! You have completed the following achievement on the Steem blockchain and have been rewarded with new badge(s) :

You made more than 10000 upvotes. Your next target is to reach 11000 upvotes.

Click here to view your Board of Honor
If you no longer want to receive notifications, reply to this comment with the word STOP

Support SteemitBoard's project! Vote for its witness and get one more award!

Congratulations @samotonakatoshi! You have completed the following achievement on the Steem blockchain and have been rewarded with new badge(s) :

You made more than 9000 upvotes. Your next target is to reach 10000 upvotes.

Click here to view your Board of Honor
If you no longer want to receive notifications, reply to this comment with the word STOP

Do not miss the last post from @steemitboard:

Saint Nicholas challenge for good boys and girls

Support SteemitBoard's project! Vote for its witness and get one more award!