Stable Crisis and how HBD EV actually works

So we all now know a lot more about how UST and LUNA work, I won't go into it here except to say that enormous LUNA inflation is being produced right now to try to prop up the UST peg, we will see if it is successful in the long run.

But the recent collapse of UST/LUNA has made people think about USDT, and now HBD. And a lot of people are commenting about HBD and its clear to me once again that not many people understand how it works.

Well that's okay, we can use this opportunity to learn!

Meme modified from @dalz original idea

First of all, the HBD 'price' on coingecko went way down, it jumps violently anyway since spreads are so high. Since this is the price that shows in the peakd wallet (@jarvie @asgarth take note), people think this is real. Is it?

The short answer is no, at least not completely.

Coingecko tracks two markets for HBD, both HBD-BTC, one is Bittrex and one is Upbit. Bittrex has really low volume, Upbit actually seems to have some really good volume over the last 24 hours (probably because the price dropped so low).

Let's take a look at the real problem, Upbit market can be seen here, but not accessed by anyone who isn't korean. They currently have 18k HBD for sale up to 3600 sats. (1.026 dollars at current BTC price of 28,500)

@upbitsteem account has 1.9 million HBD, but the actual upbit market doesn't seem to be providing this at all.

Bittrex is worse.

There is currently less than 1600 HBD available for less than 3600 sats. You can see the market here.

So why are we relying on these two illiquid markets to tell us the price? When BTC is volatile, the spreads on BTC-Stable markets get wider, and extremely wide on BTC-HBD. What we need is a stable market.

Which is exactly what pHBD provides.

Now of course you have to manage to use Sushiswap if you want to participate. Its all of little interest to me, except for the fact that it is an ingenious development for HBD and the entire HIVE ecosystem.

Why isn't HBD worth one dollar???

I get that seeing HBD at 98c makes people believe its not stable. If you think that way, I would like a chance to try to convince you that you are not seeing the whole picture.

The convert mechanism can always convert HBD to $1 worth of HIVE. So it should be worth 1 dollar right??

Well.... no.

In fact, the conversion takes 3.5 days, and uses the median price of HIVE over those 3.5 days. If the HIVE price is collapsing during that time, that is if the HIVE price in 3.5 days is less than the 3.5 day moving average of the same, then the expected value is less than $1. The markets usually reflect this game theory reality pretty well, thus why HBD drops slightly below a dollar on the market.

It also makes sense that since we trade HBD against BTC, many people will want to 'buy the dip' with their stable coin. This can create a slight skew in the price, exactly in line with the EV game theory result as shown above while HIVE price is dipping.

The best thing to do would be to wait for the HIVE price to find a floor and then start converting HBD to HIVE using the convert mechanism.

I would do this if I had any HBD left - I converted it all to BUSD and bought land with it. So this is another reminder to make sure to milk your crypto portfolio into real life gains, not just 'stablecoin' gains This might no longer be applicable now for a while - maybe we have started a multi-year bear market.

But if you learn the lessons, over time, there are many powerful tools in crypto you can use no matter if the markets go up, down or sideways.

Freedom and Friendship

Posted Using LeoFinance ^Beta