SBD conversion to STEEM, The risks and benefits!
A lot of users are converting their SBD to ($1 worth of) STEEM over a period of 3,5 days.
With SBD trading at 85 cents. It's a steal to buy it at 85 cents from the markets and convert it to $1 worth of STEEM.
There are good things and bad things about this.
A good thing is that finally the amount of SBD's (or outstanding debt) is going down because in this process the SBD's are destroyed.
The downside is that right now we are at an optimum for conversion. Which means you get the max amount of STEEM for your SBD adding a lot of STEEM to the total supply.
This explains why the amount of liquid STEEM is currently growing even though the powerups have been increasing a lot in the last couple of days.
The conversion is not without risk though it only works if things stay the same for a while.
Here's why:
An SBD is always worth a dollar worth of STEEM through conversion as long as the market cap of SBD is less than 10% of the market cap of STEEM.
Right now we are right on the edge (9%).
Markcap SBD = $11,661,954 USD
Marketcap STEEM = $126,392,004 USD.
In conclusion:
If STEEM drops a little lower (or SBD goes up) we go over the threshold of 10%.
When that happens the blockchain will give you less than a $1 worth of STEEM for the conversion.
It's very well possible that you come out at a loss (vs using the internal market right now).
If STEEM goes higher you will get $1 worth of STEEM but you will get less STEEM because the price went up.
If SBD stays close to the 10% marketcap of STEEM in the next 3,5 days you will have an optimum conversion!
Good luck converting if you choose to!
Hopefully you are aware of all the risks and benefits now.
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Get it Here:
I knew there had to be some downside of using the convert feature, thank you for the info!
Do you have any inside information on why the convert command is hidden from Steemit Inc webpage? Or is that relative to the possibility of coming out at a loss vs the internal market?
My next purchase of crypto is just 14 hrs away common hold out just a little longer so I can destroy that SBD 🔥
Posted using Partiko iOS
I wonder how many people who bought SBD knew about this little detail? Kind of important to know but nobody talks about it. With this in mind expanding the SBD print limit to 9% of the market cap now seems to have been a fairly wreckless move. We will literally still be printing SBD right until the point where we hit a mode of partial-default on SBD.
I wrote about these things before:
https://steemit.com/life/@exyle/vlog-331-will-the-current-outstanding-sbd-debt-become-a-problem-for-steem-when-the-price-of-steem-goes-lower
and
https://steemit.com/steem/@exyle/a-reversed-conversion-to-peg-the-sbd-to-usd1-is-a-bad-idea
It's also in the white paper. Although sometimes it's a bit of a cryptic read.
I made a bit of a longer post on this topic two days ago. While it is clearly not risk-free, conversion might still be profitable even if the peg breaks.
https://steemit.com/steemit/@rondras/why-i-am-converting-sbd-into-steem-now
Great info in this :-)
I guess way too many people don't know about it indeed...
Posted using Partiko iOS
excellent timely commentary, thank you @exyle !
You are welcome!
I converted some excess SBD, hope it gets back to me in time before be haircut hehe
Posted using Partiko Android
I will not do it but I we might reach the 10%.
Posted using Partiko Android
You are smart 🍻 to good info
Posted using Partiko iOS
Wow take risk sometime it changed the whole situation
.
Yup, I agreed with most of the points that you mentioned. People are converting sbd to Steem in an over limited amount which is not the good thing. If this happened continuously it will affect sbd very badly. Steem price runs according to the btc price so, this thing will not affect Steem but for me Sbd is more important than steem. So, it should get stopped as early as possible