STEEM Blockchain Dollars are currently trading above $3.00USD!
Why is this happening to an instrument that is supposedly pegged to the dollar? I asked @smooth, a well known and highly respected Steemit veteran, that same question the other day and this was his reply:
SBD is what one might call 'half-pegged'. That is, pegged from falling much below $1 but not particularly from rising about $1. If it falls below $1, then market makers (or anyone) can profitably buy up SBD, and convert it into STEEM, both raising the price of SBD and reducing its supply. However, if it rises above $1 then the only mechanism to get more SBD into circulation and satisfy that demand is to wait for more posting rewards. There are both advantages and disadvantages to this system. A proposal was made by @timcliff to allow conversions in the opposite direction which would make it more of a real-time two-way peg.
Now, that certainly clears things up. SBD is pegged to a minimum that is a targeted equivalent of one dollar, but it has no upper cap. That sounds very reasonable to me since it allows for real supply and demand price discovery to the upside. If there is dire demand to acquire SBD, then the market is able to dynamically adjust to that demand without having to resort to liquidity measures. In essence, it makes SBD even more valuable both from a theoretical standpoint and a real use standpoint (as we are seeing with the current pricing of SBD).
That deals with the “hows”, but what about the “whys”? The question as to why SBD is currently worth more than $3.00USD is more complicated since we have to speculate on the market’s behavior in order to venture an answer. Many are speculating, and I agree with the hypothesis, that what we are seeing in SBD is the result of a “flight to safety” within crypto itself. As I mentioned in a recent post, A Disaster in the Making, there seems to be a huge dark unanswered cloud over USDT (Tether) that has many very concerned and questioning the safety of their funds held in USDT. That combined with the onerous process of converting back to fiat, as well as the disincentives from a tax liability standpoint, I think has people looking for an alternative crypto-dollar peg, with the end result being an obvious bidding war for SBD.
How high can STEEM Blockchain Dollars go? Your guess is as good as mine, but I would think that once the flight to safety really gets some steam behind it (pun intended), people will realize that STEEM is really just as good and just as safe, and that it is cheaper and it also has hundreds of times more upside potential as well. SBD and STEEM are family; they’re backed by the same business; they’re the same blockchain! Look out above! Once people realize this fundamental aspect shared by both, we may see a calming in the SBD price rise and find ourselves asking what is going on with STEEM!
@scandinavianlife has started a nice discussion on the same subject that's worth checking out.
@cryptographic,
"Once people realize this fundamental aspect shared by both, we may see a calming in the SBD price rise and find ourselves asking what is going on with STEEM!"
By using this article you could covered all of FAQ of mine! Absolutely a brilliant article and SBD and STEEM are a family, so if SBD up, that means >>>> I got it! Great post friend! A valuable content you just shared with us!
Thanks and Cheers~
That is what I have been asking @cryptographic.
Is the run up in price of SBD a prelude to STEEM?
You explanation as to the why makes total sense...as much as anything else I saw out there. It is interesting that it is a vehicle with a limited downside but an unlimited upside. So I guess you could say the floor for SBD is around $.90 or so.
Will people entering SBD as a flight to safety open their eyes up to STEEM? Like you said, part of the same family but different type money. The tether crowd, I would imagine is a bit more conservative than the STEEM buying crowd. Nevertheless, the exposure cannot hurt.
I wonder how people found out about the SBDs as a flight to safety. I did not realize the steem family was that well known....
The thing about it is the Tether crowd is taking more than a 60% haircut at these levels just to get in, that’s if we assume an eventual return to parity, sooner or later, at $1.00USD. The talk's about negative interest rates around the world, and, in some places, that's what you get when you deposit your money: you pay the bank to keep your money for you - negative interest rates. That's seen as scandalous. Paying a premium for government bonds is less so. But when you're willing to pay 3 to 1, knowing that you've got an automatic loss factored in almost guaranteed (66% loss at $3.00 if you 'ride it' all the way back to $1.00), unless you're simply speculating short term, which wouldn't exactly be representative of safe haven hunters either. I believe the vast majority of buyers are poorly informed and they don't exactly understand what SBD is, and that as people become better informed, the money flow will shift to STEEM.
Of course, that will have positive repercussions for other, similar crypto, like BitShares and the ever so popular, still in Development, EOS, for example.
It looks like STEEM has the opportunity to become the poster boy for modern crypto.
All valid points. I guess the choice is does someone see SBD more likely going up to $4 as opposed to going down to $2? To me, this is a fool's play, the risk/reward isnt there. Like you said, the crowd might not understand what they are getting into.
There you go mentioned EOS again...lol. The one that I am not in at the moment. I keep waffling whether to take a bit of my next buy and get a sliver. At this point, I think I need to add to my BTS and STEEM. STEEM makes sense because I agree that it is under priced AND that I can influence my return by posting, commenting, and upvoting. There is a direct benefit for having more SP. BTS is just something I sold myself on believing it is going to absolutely explode.
Hopefully the tether crows keeps running up SBD for another couple weeks.....before switching to STEEM.
I don't own any EOS either. Mainly because it's still in development and we don't really know what will become of the ICO tokens either, but also because I think there's more relative upside potential in both STEEM and BTS, both of which are already proven products. I'll wait on EOS, and if I miss out, then I'll miss out.
As far as a couple more weeks goes, I think you've got a good chance of getting them. We'll probably start talking about the Santa Claus rally in Bitcoin as it rallies into Christmas, but I wouldn't be surprised at all to see some serious end-of-year profit taking into the New Year. We'll see.
Added some more STEEM and BTS last night.
Got caught up in the pump with the transfer...I move some BTC and after I hit the submit, the price went through the roof...probably cost me 20% of the STEEM I was buying.
Good thing the price is going to $100 to compensate me for it. LOL
By the way, your SBD article was very timely. I am not sure there is a relation but odd there was a pump last night.
SBD price peg to USD is broken and what can be done to fix it
I'm not so sure it needs fixing, especially if it required any kind of inflation, but your idea about being able to put STEEM up as collateral for SBD that you could sell on the open market (which would be a naked short, by the way) is interesting - while not exactly "fixing" anything, it would help mitigate the extremes to the upside. The downside is already covered, of course.
Naked short means a sell without backing.
When you put Steem as collateral it is no longer "naked"
Are you aware of how BitUSD is created? By putting BTS as collateral. There is no inflation involved.
It's naked for the seller of the SBD obtained by putting up STEEM as collateral. If price continues higher, the seller is out of luck and liable for the losses up to and until the point where he/she covers. If he/she still has funds enough left, the SBD can then be repurchased and used to redeem the STEEM originally put up as collateral. Otherwise the lender, who has the collateral, takes possession. Do you see how there is a possible gap in funding here? Everything between the sales price and the cover price is third party risk, that is unless there are exchange like rules in place that also monitor the seller's ability to cover losses and automatically liquidates when participants positions put them into the red, like BitShares, for example. Without that, selling STEEM collateralized SBD would introduce a nasty 3rd party risk element that would be unacceptable.
When BitUSD is borrowed/created it is backed by at least double it's value in BTS. If value of BTS collateral drops below 175% of borrowed BitUSD more collateral has to be added or there could be automatic position liquidation, so no 3rd party risk is created. Similar mechanism can be used for SBD.
That's my point. BitShares is an exchange. STEEM isn't. It's more easily said than done, and without those mechanisms, you would introduce 3rd party risk. As I've already overly expressed and reasoned in this thread (and most certainly shouldn't complicate more with unnecessary repetition), I don't think it's in our best interest either. Why should we worry about other people's bad decisions, especially when it means a cost for us which at best only minimally mitigates? That's not our responsibility, nor a reasonable way to invest our time, in my opinion, of course.
Steem is an evolution of Bitshares, built with the same graphene blockchain toolkit, so it has the same capabilities, if enabled. It already acts as a simplified exchange and with addition of SMTs it sure will get more advanced exchange functionality.
It may or may not make sense to add ability to create SBD by the same mechanism as BitUSD is created, I wont argue, but it could be done and it may help improve USD peg.
I will leave it at that. If people find this proposal worthy it will get done, if not, so be it.
Thanks for this discussion.
Can you also ask @smooth why the witnesses are not using Bias feature?
https://steemit.com/witness/@tipu/can-witnesses-regulate-sbd-price-trough-bias-option
This is like half-true, because thanks to Bias feature more SBD can be created?
I'd say that it would be opening a can of worms. There are over 75 million Tether in existence and if we were to try and handle that sudden demand simply by quickly creating more SBD, SBD would simply become another Tether, or would it? If we have a total supply cap on STEEM and we keep it, then creating more SBD would cause a direct reduction of STEEM in the same amount? And until what ratio should we do that? 75 million would be about, what, a little less than 1/3 of total STEEM? Or are we just talking about the new STEEM coming into existence? Of course it's the latter because the former is impossible, but in trying to keep things in perspective, it's interesting to look at the global theoreticals. So even if rewards went to 100% SBD, for argument's sake, that would still be a drop in the bucket and the buyer/seller imbalance would still be huge. So why even bother? Let the nutcase who's willing to pay a 200% premium pay it. Either way, the premium is still going to be there when buyers outnumber sellers, the only difference is by how much, and why should we jump through hoops just so panicked buyers save a little money. Either way, they need to learn that the real investment they should be making is STEEM, and not SBD when it's above par. Simple. I don't think we should finance their education, but that's just my opinion and reasoning - when presented with compelling logic that shows me to be wrong, I do change my mind, but at this point and time I just don't see where an upside pegging is in our best interest.
I dont think that there's some uneducated people that are pumping the price. The pumpers are very well educated and they know what they are doing. The question is do we have means to oppose them. Interesting times ahead for sure :)
I don't think it's a pump either. Didn't say that and didn't mean to imply it.
It's a panic buy spike in my opinion caused by people who have sold crypto and don't want to hold USDT. That's my thesis and the point I'm making regarding current SBD pricing. It's obvious that the people buying at these levels are uninformed since by definition the trade is very costly to them. Logically, they would not enter if they really knew what it was costing them. That's the definition of ignorance. But be careful here, I'm only talking about SBD specific ignorance, not general ignorance. They might be great programmers, expert marketing people, who knows, but what they obviously don't have a clue about is SBD. That is evident.
Now, whether we should subsidize that or not is entirely another issue, about which my opinion is negative - I like the fact that a guaranteed $1.00USD instrument can moon if there are people stupid enough to cause it to.
I think we've all got our mouths watering just thinking about buying SBD when it gets back down to $1.00 again . . . because there will always be panics . . . 😎
No, I'm not a bad guy, but I am realistic, and, unfortunately, that's life. It's not my responsibility to cover other people's irresponsibility. I'm already doing all I can by sharing my knowledge without reservation. 😉
Nahh, it's a pump (and dump?). Look at the buy spikes.
@cryptographic as you just explained and mentioned, which I totally agree with you, steem and sbd are cheaper for transactions, and safe, and does not have the problems tether is having regarding the safety of funds.
This situation has made people to start looking at steem and sbd, and this is great news for the steem blockchain and the steemit community, as well as for bitshares. The reason for this, is that sbd is showing that money will be flowing from bitcoin, eth to the big 3 blockchains that deliver (steem, bitshares and eos), and this will bring the revolution and the biggest transfer of wealth the history of the world has ever seen!
And by not to say what happened to me on ETH a few hours ago, and not resolved yet. I made 2 transactions both to buy more Bitshares, and none of them have completed yet. ETH is on a bottleneck, things are happening. Bitcoin will be in the same issues or will experience similar issues perhaps. I am still waiting for openledger-dex to credit the ETH funds to my bitshares.org account (over 100 block confirmations), and also waiting for bitso exchange to send my ETH funds to Bittrex, so as to transfer make the bts buying either with blocktrades or openledger.
The thing with blocktrades is that sometimes we have to pay a big premium when converrting funds.
Upvoted!
Regards,
@gold84
3 dollars? I thought I saw it up to 6 already XD
nice explanation of SBD pump and i agree with your points and i think another reason is that SBD is being listed on lot more new exchanges lately and that might be another little factor in SBD growth, thanks for sharing very nice information with us, it's helpful to understand the SBD's pumps, Stay awesome
That is a fact but i am indeed loving the uptrend as of now it is at 5.5 USD
I do indeed think of Steem & SBD as safe invested and this rise might attract some investors and will be probably good for the community and for Steem as well
to be honest i was wondering why this is happening too finally got some answer from there thanks a lot for making this post : D
@cryptograhic /all
Does anyone know what this means for author rewards? Is it currently best to maximize set the SBD / SP payout split to as much SBD as possible?
Or does the payout mechanism compensate for the enormously high SBD price?
great information on sbd thanks for share its good opportunity for all steem user great news.
Well said @cryptographic I agree with your pointable thoughts. Steem dollar currently unbelievable pumping It's over $3 now. You're nicely analysed SBD graph. In this fact I think SBD exchange to steem is better return to us. Steem price over $1.3 now. This time we can earn triple benefit through exchangeable functions. Steem is most safest way more than SDB. It's secure and cheaper. Thank you for sharing valuable crypto news. Resteemed.
great analysis.thanks for sharing
How much this coin will grow up. for future invertors ? :)
It always baffles me buying something that’s worth a dollar of something else for more than $1
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@boomerang distributes 100% of the SBD and up to 80% of the Curation Rewards to STEEM POWER Delegators. If you want to bid for votes or want to delegate SP please read the @boomerang whitepaper.
@cryptographic - Sir as you said, all my SBD converted to STEEM & viseversa will do when STEEM up.... Very informative article you shared Sir..... Well done & thank for those valuable information as always Sir....
+W+ [UpVoted & ReSteemed]
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Believe it or not, I found this post of yours through my bot tracking program, https://github.com/HamidMushtaq/steemtools/blob/master/steemdbtracker.py. I was also trying to get a vote from upmyvote :) Nice article though. Following you from now on. By the way, I and you must too, got a really good upvote from upmyvote this time, yahoo :)!
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With my limited understanding, The "flight to safety" reasoning in relation to USDT makes little sense to me. This argument can be made at 1$ for 1SBD, but paying 3$ comes along with a huge risk not ?
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STOPGreat post like it and upvoted!!