let's say UST being a Ponzi that exploded. HBD might lose its PEG for a few days let's say at $0.6/0.7.
Investors and users might then convert their HBD to Hive to get 1$ worth.
You are mixing up two different things. HBD is HIVE Backed Dollar so until the value of HIVE goes down enough not to provide proper backing for all existing HBD, you get your $1 worth of assets. Obv, conversions are not instant and the bank run is going to happen.
So UST explodes and trades at 0.50 or 0.10 or 0.01. An individual HBD holder that loses faith in stablecoins can sell or convert (both for HIVE). The preference does not matter because if they sell on the market (at say 0.9), the buyer is probably going to convert it themselves. So a lot of HBD->HIVE conversions are started on that day.
Obviously, the crypto market loses double digits. After 3.5 days, two things can happen:
- HIVE loses moderate amount of value. Haircut is not reached and you get $1 worth of HIVE as HBD is fully backed at this scenario.
- HIVE gets smashed and haircut rule kicks in. Maybe you get $0.9 worth of HIVE, maybe $0.5 depending on how deep the HIVE token dives.
Either way, holding HBD was a clear winner over holding HIVE. In (1), HIVE went down and HBD was stable. In (2a), you lost 10% holding HBD and holding HIVE would lose like 40%. In (2b), HBD lost 50% while HIVE lost like 70%.
Also, when the doomsday conversions are done, HBD supply is down, HIVE supply is up and the pressure eases as more HIVE coins are backing fewer HBD.
Posted Using LeoFinance Beta