The Hive debt is an essential parameter for the Hive ecosystem. The stability of the HBD depends on it. If the Hive debt grows above the debt limit that is set by the chain, then the value of HBD will drop. Since the Hardfork in October 2022, this limit is set to be at 30%. Before, it was set at 10% and in the very early days back in 2016 it was at 5%.
Let’s take a look how the debt has performed in these market conditions.
The official calculation of the Hive debt is here: https://gitlab.syncad.com/hive/hive/-/blob/master/libraries/chain/database.cpp?ref_type=heads#L4869
The conventional knowledge is that the hive debt is share of the HBD market cap from the Hive market cap. But the way the official formula works is different.
It uses the HIVE tokens to calculate it but with nuances.
DEBT = (HBD Supply excluding the DHF / feedPrice) / (HIVE Virtual Supply excluding the DHF)
For example the current HBD supply exlcing the DHF is 11M HBD and the feed price is 10 cents, then we have 11M / 0.1 = 110M as nominator and for the virtual supply we have 502M regular HIVE supply + 110M = 612. Finaly debt = 110 / 612 = 17.9%
Here we will be looking at: - HIVE supply - HIVE market cap - HBD supply - Historical debt - Debt support price - HBD market and on chain price
The period that we will be looking at is from the very beginning 2016 - 2025.
HIVE Supply
As already mentioned, when looking at the HIVE supply there are two data points. The regular HIVE supply, that is simply the amount of HIVE tokens in circulation and the second one the virtual HIVE supply that includes the theoretical HIVE that can be converted from the overall HBD supply.
Here is the chart.
This is the all-time chart for the supply starting from 2016, including the old versions 😊. The light color on the top is the virtual supply, and the very top is with the DHF. For the debt calculations we use the middle line.
We can see that the supply started at around 200M, and now we are at 500M.
We can notice the oscillation in the virtual Hive supply. This is due to the fact that the virtual Hive supply is connected with the HIVE price, and it reflects the moves in the price.
HBD Supply
Next for the HBD supply. Here is the chart.
Note: This chart doesn’t include the HBD in the DHF that is now a dominant HBD holder with 23M.
We can notice the two peaks in the supply in both of the previous bull markets. First in 2018 when there was around 16M HBD, and then later in 2021 when for a short period of time the HBD supply reached 25M. Now we are around 11M and the supply has been steady around that number in the last two years.
Hive Debt
When we apply the data from the above, about the virtual HIVE supply and the HBD supply converted as HIVE we get the debt value.
The chart for the historical debt looks like this.
This is the all-time chart starting from 2016. We can see that in the past the debt limit was broken on two occasions. First in 2018 and it lasted for a short period of time, and then again in 2019 and it lasted for six months. In October 2021 there was another breach of the 10% limit but for just a few days.
After the last change and the increase in the debt limit to 30%, we have not breached the debt limit yet. If it was to stay at 10% we would have breached now. We are now close to 18% debt and it is an ATH for the debt.
The overall debt has increased in the last months especially reaching a 17% at the moment.
Debt VS Market Cap
Now a few comparison charts against the debt. First the market cap. If we plot the debt and the market cap on one chart, we get this.
The overall trend here is the drop in the market cap which is inversely correlated with the debt. As the Hive market cap drops, the debt increases. Although we can see that it has been a smoother ride in the last two years, unlike the first years.
Debt VS HBD Supply
Here is the chart showing the debt against the HBD supply.
Some trend from the above is that first we have an expansion in the HBD supply and then an increase in the debt. The debt usually lags a bit after the expansion of the HBD supply. But again, we can see that in the last two years we have had a more stable situation with small increases in the HBD supply and the debt.
Debt Support Price
The debt support price represents the Hive price that supports the current amount of HBD in circulation. If the Hive priced drops below this price, and the HBD in circulation remains the same as it is at the moment then that HBD will no longer be valued at one dollar.
At the moment this price is at around 5.5 cents for 10.6M HBD in circulation and a 30% debt limit.
Historically the chart looks like this.
The white is the regular, with red is the debt support price.
We can see these two follow each other in a self-balancing act. In the first bull run in 2017, the HIVE/STEEM price increased, so does the debt support price and it was at $1 for a moment. Then the HIVE/STEEM price dropped and crossed the support and HBD/SBD lost its peg in 2018. The excess amount of HBD/SBD was slowly removed through the years, and the HIVE/STEEM price increased above the support.
When we zoom in the last period we get this:
We can see the closing in on these two in the last months. As the HIVE price dropped from 30 cents then to 20 cents and to 10 cents now, it is the closest it has been to the support price. The support price itself has dropped a bit in the period as well and it is now at 4.5 cents, while the market price is at 10 cents.
Debt VS HBD Prices
The one thing that everyone around doesn’t want to see is a drop in the HDB price. But HBD losing its peg is by design and it has happened in the past. The debt is the key parameter when this happens. Here is the chart.
This is a long-term chart for context. HBD has quite a low trading volume but still we can see the market price has been hovering close to one dollar since 2021. It’s been four years with relatively stable HBD. In 2021 the ironically the break of the peg was on the upside.
Prior to 2021 there was a break on the downside when the debt limit was broken in 2018 for a short time and again in 2019 when it broke for a longer period of time.
What price will the blockchain value HBD after the 30% debt limit is reached?
This depends on how high the debt is. If the debt is higher, the HBD price will be lower. Example table:
Debt level | HBD On Chain Price |
|---|---|
< 30% | 1.00 |
40% | 0.75 |
50% | 0.60 |
60% | 0.50 |
As we can see from the table, for a debt level between 30% and 40%, the HBD on chain price will be in the range of 0.75 to 1.00. For a debt level higher than 50%, the HBD on chain price is closing on the 50 cents mark. But as we have seen historically the lowest the lowest HBD/SBD has been 60 cents. It remains to be seen how will the chain acts with increased debt limit and more HBD in circulation compared to the market cap share if we get another breach of the debt limit any time soon.
Live data for the Hive debt here: https://www.hbdstats.com/
All the best @dalz
Every time I read about it, I'm not sure if we need to take actions or it's okay and it's part of hive engine
It helps me understand how Hive debt affects HIVE and HBD, and why changes in debt limits can impact the value. Thanks for sharing these insights.
I'm sure there are people, developers surely, who are working tirelessly to keep the hive debt at the expected 30% level and their efforts are to be commended. I can imagine the kind of chaos that will break out in the hive ecosystem should the price of HBD go below $1. So keeping Hive Debt at the required level is of utmost importance. Thanks for the stats.
Understanding the connection between Hive debt and HBD’s value is very important. Keeping debt under control is crucial for the ecosystem, otherwise it could lead to instability.