Haha, yeah, though even when Jeff was there, there was a lot of uncertainty and confusion. Jeff is super pumped about Steem, and I'm glad that he's doing so much to promote it, but he has much to learn yet (which he's vocally aware of, so good on him).
Off the top of my head, I can think of two reasons why 1 SD would trade at substantially less than $1:
- Low liquidity
- There's just not enough people buying/selling it to maintain a reasonable price
- Solution: people should buy up these dirt cheap Steem Dollars!
- Lack of trust
- Steem dollars are redeemable for $1 worth of STEEM as long as STEEM is worth something
- If people don't trust STEEM's market cap to stay greater than the total supply of SBD, they reasonably won't trust SBD to be worth a full dollar
I feel it has something to do with discrepancies between Internal Market and exchanges. Currently, the Internal Market is trading at SBD 1.97 for 1 Steem. If SBD 1 = USD 1, the exchanges would be trading at US$ 1.97 too. But the exchanges are at US$1.70. By undervaluing the SBD at $0.90, it keeps the USD value of the Internal Market much closer to the exchanges. However, in this case, should the Steem price not rise to meet the Internal Market? And not a fall in the SBD?
But anyhow, that's how it has worked out so far. I hope this stabilizes in the future, and the Steem founders are taking measures to do so.
The internal market is almost entirely irrelevant at this point. Hardly anyone uses it and I question whether it is even needed. (We have it and it works, so I wouldn't suggest getting rid of it, but if we did, the essential functions of Steem would not be affected at all.)
I agree with @modprobe's answer.
The internal market is using a 7-day rolling average price for Steem.
The internal market is based on supply and demand, just as Poloniex or Bittrex. The price will generally track to the price found on external markets.
Also the fact that it's locked up for 7 days. I've posted arguing that it should be changed from a 7 day waiting period to a 3 day waiting period, due to the risk that is involved. Changes in the market can cause the user to lose money... If the price of STEEM is below the weekly average when the order is executed by a greater proportion than the market is undervaluing SBD, they will have lost value. It's hard to forecast what the market is going to do a week out.