Wow, it's been a brutal month.
CoinGecko told me that the HIVE price was $0.1232 and the market cap was $61,070,117 a few seconds ago.
Ausbit bank tracks the HBD token. Ausbit said that the HBD Marketcap was $11,454,710.598 and the HIVE Marketcap was $100,200,610.
I believe that Ausbit is showing an average over the last three days.
I wonder about the huge discrepency between the CoinGecko and Ausbit marketcap.
HIVE is inflationary. Our author and curation rewards come from inflation built into the currency. So it is likely that CoinGecko has data that does not accurately reflect supply.
The HBD / HIVE Ratio
Ausbit reports that the HBD Marcap has risen to 11.432% of the HIVE marcap. If this rises to 30%; we could see something called a haircut.
BTC is still trading at an astronomical $109,551. A major disruption in bitcoin could easily cause a halving in the price of HIVE.
This haircut is closer than we think.
HBD is a Derivative
FWIW: The HBD is a derivative. The value of HBD is derived from the value HIVE. HIVE has a program that converts HBD to HIVE. If someone put a thousand HBD through the conversion at $0.123, the conversion program would destroy the thousand HBD and generate 8,130 HIVE.
Since HIVE is low, the smart move is to convert one's HBD holdings into HIVE. If smart users converted one million HBD to HIVE we would see 8,130,000 million HIVE dumped on the market.
The problem with derivatives is that investors dumping their derivatives on a weak market can completely destabilize the market.
I Like HBD but Dislike the High Interest on HBD
I like the basic structure of HBD. HBD creates a fun stable coin in the network.
I was angry when the witnesses started paying a stupid high interest on HBD. I was also angry when core investors started clamoring for a high HBD marcap.
What were they thinking?
Debt Amplifies Dips
Some users have noticed that HBD has similarities to debt.
Anyway, I decided to write a post titled "debt amplifies dips" to point out that it is likely that the stupid high interest on HBD made the current dip deeper than it should have been.
I've been angry at the HIVE witnesses for the high interest on HBD. I was angry because the high ratio of HBD to HIVE amplifies the dips and makes the platform more volatile.
I Probably Should Apologize for My Midnight Rant
I probably should apologize for my midnight rant. I've been angry at the people who supported the high interest on HBD for several years.
The cost of the stupid interest on HBD is that the dips in the price of HIVE are deeper than they should be.
Stupid high debt also drives away smart investors.
The stupid high interest on HBD hurt the platform. I had been waiting for a dip to say this.
I recommend that users follow ausbit report on hbd carefully.
If you are holding HBD, the smart move is to pull it from savings and convert it to hive. this dumps hive on a weak market.
This type of financial structure can lead to something called "a death spiral."
The Picture
As for the picture. I've been generating images for the inktober game on Night Cafe. I generated an image of the market teaching an investor about the dangers of debt. The bottom picture is for the "vacant" prompt.
If we cut the HBD interest rate, a few speculators may dump their holdings and cause a "crash," but once that is over, we can find a new equilibrium.
If we maintain the status quo, the debt builds, and I agree that is not healthy in the long term.
Which witnesses can we persuade to start reducing the rate, say 1% at a time ove the next few months, to avoid a shock? It makes sense to keep HBD returns above the US inflation rate, so 10% might still be reasonable IMHO.
I prefer buying hive on the internal market with HBD vs. converting it. I suppose if you are doing large amounts conversion might make more sense.
The HIVE/HBD conversion works with the market to keep the HBD dollar peg.
So, if the price of HIVE was $0.95 and you traded it on the market, you would only get $0.95. In this case, it is better to use the conversion. You have to wait three days, but you will get a full dollar.
When I see the the price of HBD is above a dollar, I will convert HIVE back to HBD.
There are numerous bots, like the HBD stabilization fund, that play HBD/HIVE arbitrage.
I figure that I will support the peg. When I see the price is below 97% I use the conversion process. If it is above, I use the market. If HBD was over $1.03, then I convert any free HIVE in my account back to HBD.
I like this formula. The system successfully maintains the peg without paying interest on HBD.
!WINE