SBD Returning to $1
SBD/Dollar parity
Steem Backed Dollars are supposed to be a stable coin, but that hasn't been the case for the past 7 months, when SBDs dramatically rose to $13. There has been no stability in SBDs since, and the price has slowly deflated all this time. My general strategy has been to convert my SBDs to Steem daily and power it up.
Now, that strategy is about to change.
I expect SBDs to drop below $1, but barely. Meanwhile, I expect the price of Steem dropping further and getting close to parity with SBDs again, resulting in a 1:1 ratio at some point. We'll see whether or not that happens, but in the meantime, holding SBDs will be a little more stable than most of the tokens in this market (I don't expect SBDs to get lower than 90 cents or so), and allow me to build up a small hoard that can be used if other tokens continue to fall in price.
Here's why this is good: this bear market, with depreciating tokens, is demoralizing. While I've been content with plugging on and writing a handful of articles each week, I've noticed a lot of decreased activity in both my feed and my comments section. It's less exciting to take time to do stuff on Steem when the payout is low, and lowering daily.
With SBDs getting back to $1, rewards can be built up. And if the price of Steem continues to plunge (which is much more indicative of the overall bearishness of cryptocurrency than Steem itself), we may even be able to acquire Steem for less than one SBD. I'm now saving my SBDs in anticipation of this.
There is some risk here: stable coins are not always as stable as they advertise. SBDs could drop below 90 cents, even down to 50 cents or lower, and never recover. I don't expect this to happen, as the Witnesses can change rewards payouts to lower supply of SBDs, or offer dividends to make them act like bonds, creating upward pressure on the price as people seek even small (3-5%) rewards for holding.
What's great about Steem is that anyone with an internet connection can start writing/producing content and not put any of their own money at risk.
Posted from my blog with SteemPress : http://steemmaker.com/sbd-returning-to-1/
SBD will not go much below $1 (barring extreme circumstances) because they are exchangeable for $1 worth of STEEM. So if the market price for SBD were to drop to $0.80 for example, then people would start buying up SBD, converting it to $1 worth of STEEM, and selling that STEEM to make an instant profit.
This would very quickly bring the price of SBD back up to $1. Adding the reverse option has been discussed as well - i.e. being able to buy 1 SBD for $1 worth of STEEM - which would keep SBD from rising much above $1 in the future for the same reason.
If SBD is less than $1 there is no incentive for the 50/50 payout. Many more posters will switch to 100% SP and significantly reduce the creation of SBD. This keeps it soft pegged on the bottom. I don't think it's possible for SBD to go down to 50 cents.
Investing in SBD at $1 or less is a zero-risk investment because we've all seen how dumb money that gets dropped on every coin can spike the value.
The more I research the Maker platform the more I realize it's superior to SBD. Steem should get rid of SBD all together and copy maker. The Maker governance coin pegs Dai to $1 by allowing users to draw Dai out of a Collateral Debt Position.
You basically lock up your Ether coins in a smart contract and create Dai when it's worth more than $1. When Dai is less than a dollar you can buy it back to pay back your loan at a cheaper rate. If this system was implemented on Steem SBD would pretty much always hover around $0.98 and $1.02. I hope SMTs are strong enough to provide this functionality.
Ah, I had forgotten about the 100% power up! Thank you!
Yeah, I love Maker. I had been skeptical about stable coins (and am skeptical of most) and the ability for Maker to work through an insane event (which we haven't seen yet), but it does seem fairly robust so far.
Maybe SBD could just be changed to a Maker/DAI model at some point, although Steem is already a fairly complicated blockchain, and I'm ok with leaving SBD as it is for a while, because it's a non issue (all the other stuff Steemit Inc is working on right now is far more important) for most people. Plus, you'd have to really change some stuff to make it work (Maker gets burned or inflated when necessary) on Steem, and that seems too careless...
Do you see an SMT being created that could do this?
I don't think SMTs are going to have enough functionality to make a coin like Maker. However, I think as time goes on more functionality will be added to SMTs. Maybe I'm wrong though I don't know much about SMTs.
I feel like the Ethereum crash from $1300 to $350 was a pretty good test of Maker's ability. Think about how cool it would be if you could lock up Steem coins in a CDP and draw SBD (or another stable coin made by SMTs) out of it?
If Steem get's a real stable coin attached to it we can actually be taken seriously as a payment coin. With 3 second blocks and zero transaction fees this would be insanely powerful.
I would like to thank you for two things. First, thank you for figuring all this stuff out, and second, thank you explaining it to those of us who thought SBDs were something you had to see the doctor for. So, THANKS!
It certainly has gotten a lot quieter on Steemit. But that is a good thing for those who are still posting. Maybe a bit easier to be found!
I like your take on what might happen here in the near future and will do a bit more holding on as well. I have been converting and powering up as well.
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This has been interesting for those of us who joined in Dec/Jan time frame. I have seen less traction, but also less spam. Are you also going to flip you post payout from 50/50 to 100% powerup if the ratio flip? I thought that was the way to get the most value from your posts when SBD dips below $1