At the end of last year I published this blog post about how HBD seemed to be pulling back from getting a "haircut" - and included an explanation of what the "haircut" is:
https://hive.blog/alive/@hirohurl/hbd-back-from-the-brink-of-a-haircut
So far this year, however, the debt-ratio has kept on rising to new highs and is getting closer and closer to the 30% haircut trigger. The screenshot shows the current situation:
It's worth listening to @starkerz to understand why this is bad:
Given all that, I think the interest rate ought to be lowered to 10% for now.
However, one objection to dropping the interest rate when the price of Hive is low is that it could cause investors to sell and leave Hive altogether instead of selling HBD to buy cheap HIVE, thereby driving the price of HIVE even lower.
Of course, even cheaper HIVE would be a compelling buying opportunity. Also, if the haircut kicks in, HBD investors won't be getting any interest payments at all.
!PIMP
!BBH
!ALIVE
They removed the "haircut" a couple of forks back. As it is now, the "equity" Hive, is less than the HBD "debt"...
My calculation the Market Cap of Hive is 9.725M USD - HBD not in DAO = 10.4M USD... Hive/HBD in the DAO represents over 72% of the Hive supply... if they burnt it all, it would be like taking a chain away from around the neck of Hive... but still the debt is HUGE compared to the true market cap..
Ah, thank you for clarifying that. I talked about this to several people at Hive Fest and everybody discussed the situation as if the haircut rule still existed. If there is no haircut then the situation is worse than I realized. What's to stop us going the way of Terra now?
!PIMP
!BBH
!ALIVE
They are tied together, they go down with the ship.
I did the math on my latest post, you can check there...
Greets to Japan! :)