One often hears the mantra "code is king" while navigating the crypto world.
The basic idea is that investors should invest their funds according the functioning of the code and not the suggestion of pundits.
Witnesses raised the interest on HBD 20%. This makes HBD the preferred token on HIVE; So people should pull their funds from Hive-Engine and put it in HBD. The activity on honey swap indicates that there has been a steady flow of funds from Hive-Engine after the HBD announcement.
@geekgirl published a post listing the top 300 recipients of HBD interest. Her research says that the system delivered 35,223 HBD in April. Interestingly, the top 12 accounts received over half of the HBD interest. Several of the top 12 accounts are not active on the forum. The top 208 accounts received over 90% of the funds.
This next figure is fuzzy. The daily stats from @penginpablo says that we have over 15,000 daily active users on the forum. The [reports from arcange] claims that there is over 600,000 monthly active users. I feel comfortable stating that there is well over 20,000 active accounts on HIVE. I feel comfortable making the statement that over 90% of the HBD interest went to less than 1 percent of the active users.
The decision to raise the interest on HBD to 20% is transferring wealth from the the 99% to the 1%. Gosh, what a revolutionary idea.
Some people claim that the rise in HBD interest will increase the HBD in circulation. This claim is counter to human nature. People tend to hoard their most valuable coins while spending their least valuable coins. Since my saved HBD is my most valuable coin --it earns 20% interest-- it is the last coin that I will spend. I will powerdown and liquidate my low interest HIVE before I touch my HBD savings.
Withdrawing HBD savings is costly. It takes three days to withdraw from my account. If HBD is trading at below $0.95; then I have to push it through an additional 3.5 days to convert it to HIVE. I suspect that an honest evaluation of the HBD savers will show the same behavior. The high interest rate removes HBD from circulation.
My Hive-Engine strategy.
For the last several months I've been transferring my HBD earnings to Hive-Engine and investing in alt coins. My monthly recap shows that my HE investments have been on a rapid decline.
The smart move would be to unstake and dump my alt-coins. But, I am a sentimentalist and I like my alt-coin collection.
I admit. My main interest in collecting alt-coins is that I want to support the communities funded by the alt-coins. I admit that the cookie-cutter tribes are all silly. The smart players on the platform drop a half dozen tribe keywords on each post creating the absurd situation where the same content shows up on the cookie cutter tribes.
But I think that Hive-Engine is the most likely source for new ideas on the platform and I really want to support the alt-coins.
The HBD interest issue has thrown me into a quagmire. I want to support the alt-coins. The high interest says that I should put ALL my HBD into savings.
I look at how the smart players are simply dumping their alt-coins to buy HBD. Abandoning Hive-Engine is the smart decision.
I will write about my HE strategy tomorrow. I think I will end this post with a final note:
Selling HBD at junk bond rates does not make HIVE look strong. Selling HBD at junk bond rates makes HIVE look like junk. HIVE has been falling at a rate faster than Bitcoin in the current bearish market.
The data shows that twelve people are receiving half of the HBD rewards. 90% of the HBD interest is going to less than one percent of the active users.
I hope that the witnesses realize that they blundered when they made the decision to sell HBD at junk bond rates. I will write the post I started to write tomorrow. Everytime I start thinking about HIVE, I get too depressed to write.
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These are highly inaccurate calculations. We should consider daily emissions of HBD to authors as well to get full picture. There is roughly 50-80k HBD peinted DAILY as rewards to authors, how does that change a picture you paint? HBD is highly accessible for active and dedicated authors and each person wanting to take a risk of staking slightly underpegged asset is free to do so.
As far as the same data brought by @penguinpablo states people choose to CONVERT these superior asset back to HIVE. And powering down en masse is simply not visible.
Your mere APR calculation doesn't include risks/rewards ratio and utilities of tokens and proves nothing in this case.
The HBD received by authors comes from inflation on the HIVE and not the interest on HBD savings. We can see this because the HBD rewards received for a post dips when the price of HIVE dips and rises when HIVE rises.
Coingecko shows that the HIVE price has been falling faster than the BTC price. If the high interest on HBD savings worked as planned, the price of HIVE would be rising right now.
If the high interest on HBD causes the value of HIVE to drop (which is the most likely case); then the HBD interest hurt HIVE authors.
The transfer of funds from HE to HBD is visible. You can see this if you followed HoneySwap or simply look at the coins on HE which have fallen steadily after the HBD announcement. Again, I can show you dozens of accounts which dumped their free HE tokens and then transferred funds to HBD.
The impact on HIVE probably won't happen for a year. HBD interest is relatively small. The interest compounds and we should start seeing much larger payments per month.
Trends you discribe are nothing outstanding in given conditions. While market tanks, smaller coins tank even harder. During last bear barket BTC lost roughly 80% of its price, at this time most of altcoins dropped by 95% and more. This is asimple risk management by investors.
Obviously HBD rewards come from inflation, but you missed the point, HBD interest is a drop in the ocean while compared to author rewards, hence irrelevant and your theory doesn't stand in the light of these facts.
HE tokens are extremely nieché and risky investment for a long term. It's no surprise these might tank even harder.
Those two pennies are worth ~6 cents.
20% interest is a low return on a crypto.
Hive could go up exponentially.
I'm trying to hold onto the hp part of my rewards and work with the other 50%.
Hive-engine and cubdefi are ok places to park some.
HE will blow up once hive starts getting too expensive.
I think selling hive, even as hbd, at this point, is a loosing move.
As more coins get outed as schemes the hive will really shine, imo.
Pretty hard to fake what we have going here.
If we want HBD to be a true stable coin, then there needs to be a lot more of it out there. I think the pHBD/USDC pool out there is a great start to allow people to go in and out of HBD. I don't think a 3 day withdrawal period is that high and the peg shouldn't really be that large with the pHBD/USDC pool in PolyCUB.
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The pHBD/USDC pool might be the one saving grace. The pool isn't really dependent on the high interest.
Three days is not a long time. However, it is long enough to keep people from using HBD as their primary currency. People who plan large purchases factor such things into their equations.
For example 3 days is a tenth of a month. I would not put money in HBD that I might use in the upcoming month because that 3 days reduces my interest by 1 tenth.
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Sticking to HBD is a plus for those who don't have time to participate on block chain activities. Both HBD and hive have there place dependent on the jnvestor and there strategy
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Do you think that raising interest rate on HBD significantly would harm HIVE as the entire orientation would be to the currency with the greatest benefit
I think that it is currently hurting Hive-Engine. HE depended on people moving the HBD into HE. Many of the coins on HE have set new lows since the HBD interest announcement.
NOTE: Hive is the base currency of HE. The lows on HE are not due to the drop in the price of HIVE.
!luv
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The HBD interest is the talking point at the moment and the best move as well to save more HBD in savings with the interest attached to it which is pretty nice and also beneficial in achieving more profits in the nearest future.
The economics of all this is a bit above my pay grade but from my understanding it will be good to have more HBD in circulation to stimulate acrivity and turn it into a useful coin. The tribes have really not preformed well, even before this change so I don't know if it is the main cause of their decline.
I am shocked to hear the figures of where the interest is going and just hope those smarter than me know what they are doing. I will say however that I would like to see benefits of Hives success go to those who are active on the platform and not just hoarding investors.
I'm curious if this will create a run on the banks. How much can the markets take when the selling of HBD picks up
The HBD page on Ausbit shows that there is only $9,088,210.263 which is chump change to banks. We aren't even a rounding error to the Federal Reserve.
The reason it is so small is that a large number of people just use the "convert" button to turn their HBD into HIVE. This destroys the HBD and creates HIVE in its place.
If HBD savings grew to $5 million; then the high interest on HBD would start creating 1 million HBD a year.
The whole reason HIVE is able to get away with the high interest at this moment is because the supply is low. But the high interest rate will change this.
!pizza
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For me it's good to spend HBD coin and convert it to Hive because its price is almost fixed despite the interest given. As for the Hive, its price changes and rises a lot. So the benefit will be double, right?
You should only "convert HBD to HIVE" when the price is under $0.95 USD. In most cases it is better to trade on the internal market.
https://wallet.hive.blog/market
The "convert button" destroys the HBD and creates HIVE. The market lets you trade between the currencies.
!wine
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Keep investing in alt-coins actually. The potential is still there, don't worry about the price for now.
As for HBD APR, I maintain my position that it looks like a net positive even though now is the time to observe
I have to strongly disagree with this assessment. There is no transfer of wealth. HBD interest is not taking out of anybody's pocket to pay the payments. It is just a feature blockchain offers to make this stablecoin attractive.
20k active losers are not losing anything. Active users, passive users, and not yet users have an opportunity to participate in HBD economics. Question is who is willing to risk their money. While investing in HBD is a low risk investment with decent returns, holding HBD means shorting Hive. Those who hold HBD instead of Hive or HP will miss out on even higher returns if Hive starts going up in price. HBD is pegged to $1. Hive has no limits of how high it can go.
Of course HBD interests don't come from nowhere. Somebody needs to pay for them. Hive stakeholders are the ones who are paying for HBD interest payments, just like they pay for everything else like content rewards, witness rewards, etc.
All of the Hive inflation comes out of stakeholders' pockets. While funds are not directly taken from their wallets, printing more Hive and HBD dilutes their original stakes, and they end up having less shares of the network than they did before.
Now, this can be a good strategy if one believes in the future of the network and all the features network offers will eventually end up making underlying Hive coins appreciate in value. That is how investors will get rewarded.
That's why DPoS system, allows stakeholders to decide what is the good path for Hive blockchain network. If stakeholders didn't like the idea they could have easily voted out the top witnesses who chose to signal 20% APR. The opposite happened. Which means stakeholders like the idea, at least for now.
Being an active user doesn't entitle anybody for anything. But it can also be rewarding. It is an open network. People can participate as they choose. Some like to blog, some like to play games, some like to curate, and other just like to invest.
Again, there is no transfer of wealth. At least not the way you described. :)
Thanks, a very informative post. I think 20% won't last too long if you look at the history of the % rate and debt ceiling breaches. But we'll see.