Bad news for Steem? Steem Dollar finally slipping below $1 again at a not very opportune time.

in #steem4 years ago (edited)

During the month of June Steem has benefited from a lack of SBD conversions. The reason for this has been that the Steem Dollar has been above $1 in price, and thus it is not generally profitable to convert them into Steem.

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The lack of conversions has helped Steem to recover from the excessive inflation it experienced after the Hive fork, where millions more liquid Steem was created than Hive. This was a double edged sword though. Although it means less Steem inflation, it also meant more SBD inflation. As I wrote a few weeks ago, in the long run inflation in both Steem and Hive gets worse if conversions happen at a lower feed price. Thus if the price of Steem goes down before conversions start happening - the SBD that was built up will convert into a larger amount of inflation later.

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That's exactly what it looks like is happening now. The Steem feed price is down to $0.20, the real price is below that getting close to $0.19, after spending time in the range above $0.20.

If the Steem price had risen, the lack of conversions would have been good for Steem overall, as it would reduce inflation in the long run. Instead, Steem's current 5,770,131 SBD (which compares to only 5,076,983 HBD on Hive at a higher feed price) stands to convert to more Steem than it would have if it had simply gotten converted in the last few weeks.

Conclusion: If the price of SBD keeps dipping below $1, especially if it does so substantially, expect a drastic increase in Steem inflation over the next few weeks. Hive is also experiencing excess inflation - but it has not been as bad because it was happening at a higher feed price than Steem (Hive price feed has been around $0.25, while Steem will likely be converting at $0.20 or lower).

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I'm quite surprised that Steem is still valued at all considering the amount of it that is being sold to buy Hive.

So STEEM price will fall I guess?

Basically. He's saying that when you convert using the internal mechanism, you will lose because SBD is more than $1. However, if the value drops significantly below $1 and the price of Steem also drops, the 3.5days conversion will lead to drop in Steem price due to increased printing from the conversion.

Well supply is only one component in price. But increasing inflation definitely should not be expected to be positive for price.

The fututre of steem is questionable.. but I think the price of steem will go down if not for anything, for the migration that is happening.. hive is doing things that can reduce the effect of the inflation

real longterm steem value = 0 BTC

The end is finally here for steem

I would not say that. It's just going to have increased inflation (which has happened in the past as well).