Yes ur correct about the fee on one side.
I don’t agree with the rest of your comments. There are various real world outcomes.
Also, I’m not talking about using liquidity that exists to buy HBD. I’m talking about using the conversion. There is no such issue with liquidity there
If you can inflate a market cap just by buying, someone as easily can deflate the market cap by selling. Geekgirl's theory assumes a perfect world where no one does sell their Hive after she is done purchasing hive and market cap to stay the same.
And by converting your hive to hbd, you are actually increasing the debt ratio. When it reaches the upper soft limit(20%) all conversion requests of HIVE to HBD is rejected. So her premise is already flawed from the get go.
This is true. But I don’t think this is what will happen, and it’s certainly not a reason not to approach such a method of HBD creation. The theory is that as pne buys hive to covert to HBD, the hive market cap will increase significantly more than the HBD market cap being created.
It means it should lower the debt ratio at the same time as creating more HBD.
In real world, people sell their Hive. People are selling their Hive right now, and bringing market cap of hive down.
I am not saying it wouldn't create more HBD, it will create more HBD until certain point and that point is 20% of the market cap.
And as she says in her theory, she is not going to buy too much too quick so price doesn't move too fast. That means affect on the market cap would not be significant.
Market Cap = Coin Price * Coin Amount
If you are not moving the price too much, it means you are also not moving the market cap much.
I don’t think it would even come close to 15% doing it this way
Affect on market cap will be significant. Hive goes up, hbd goes up even less, haircut limit is further away.
The idea is to move the price, and put hive buy orders under the market to support the price so that u guarantee a great HBD conversion price. If u are clever, u can make a contract with the investor to take 20% of any HBD u get them over their USD investment price. As far as I can see, u do this right and everyone here, including u retires
You can only have 20% of HIVE's market cap converted at any given time.
To convert 1 billion HBD, you have to make HIVE's market cap 5 billion. That means you have to increase the HIVE's price from 0.27 USD to 9.80 USD.
And then you are hoping that no one is going to dump their hive at that price and reduce the market cap. (People are already dumping their hive at 0.27, it would be merry fucking christmas for them. So impossible.) This theory is full of wishful thinking.
I don’t think it worked quite like that. It’s a little more nuanced. But yes, u could easily increase hive piece to well above 10usd. And far beyond that. In this case (with 1 bn usd going into hive to convert to hbd, I’d imagine the market cap of hive would easily be well above 5 bn. Well above. The ppl buying hive for hbd would have to build into their strategy they there would be selling from hiveans and have enough mitigation to absorb reasonably expected selling amounts. This is one of many mitigation’s that should be considered before a hedge fund does such a thing
Free market will always work things out...
In my example, there is a player with massive amount of money that is equal or great than the current market cap for Hive. That kind of funds would definitely make big moves in the market, even with slow and steady strategy.
I also assume in free market such price movements would be noticed quickly by other players would also want to participate. These would be new participants of Hive network.
Of course there will always be those who sell. People sell everything all the time, if there is a right price. Selling is great for Hive, it makes the distribution of Hive wider and makes it more decentralized, and networks becomes stronger.
I doubt debt ratio limit would be reached, because upwards momentum of Hive price would hold for very prolonged time until crazy Hive price becomes a norm. (think bitcoin! Those who would sell it for 10k few years ago, won't do it now)
Cashing out or selling HBD wouldn't be immediate, because the investment strategy is long term to earn APR by holding HBD as a hedge or diversification. I would take several years for HBD holder to sell them, or network action that makes APR not as attractive anymore. By this time, there will be plenty more interested in this action. They will gladly by HBD from the seller, instead of paying the conversion fee.
Also, any big price action in Hive or big interest in HBD would make major exchanges to list both, which open bigger markets.
Yes, it is just a theory. But it is a theory I would go for if I was managing $10 billion, and become a fund manager of the year/decade.
And that is why you are not managing $10 billion.
As I said people are already selling at $0.27, they will continue to sell it at $9.80.
Only difference is you would have to buy it at $9.80 to keep the market cap. Since now you pumped the market there is more money in the market than you can afford. Which means market cap would go down pretty quickly once you run out of money to support the price.
And if someone else comes and does the same as you did, now you are even in bigger trouble. If they don't try to support the elevated price, now you need to defend that elevated price or the debt limit would be reached.
This someone else doesn't need to be an instuition, they can be individuals. Any HBD they convert or gain is a nail in your coffin. Because individuals would not defend that price, they would not have the power to defend that price.
And thanks to you pumping the price of Hive to statosphere, everyone is earning ton of HBD.
Even before you can buy enough HIVE to convert to HBD, ton of HBD would already be printed.