Sampling SBD Conversion Returns
I have been collecting the price feed, SBD exchange rate, and http://www.steemdollar.com/ ticker at various times over the past few days. I wanted to see how often a hypothetical 1,000 SBD conversion would have produced more value than the exchanges were offering. I was expecting pretty mixed results, but they were quite promising.
Of the 6 data points that I sampled, two would have resulted in breaking even or slightly losing. The other four were clearly profitable. Of those four, one showed a substantial gain over the market price.
As a frame of reference, the Poloniex chart of the last week shows some volatility but no distinct trend in either direction. The market has been pretty favorable for conversions, given that there has been no steep decline in price.
2016-08-04 7:55 AM EST
1000 / 2.333 = 428.63266 STEEM
428.63266⋅$2.165 = $927.98971
Here we see that the value of the Steem we would get back from a conversion that finalizes at this time would be greater than the market is offering.
We can verify it by looking at the internal market:
It checks out!
2016-08-04 at 2:27 AM EST
(1000/2.350)⋅2.2 = 936.17021
2016-08-03 at 11:08 PM EST
(1000/2.350)⋅2.14 = 910.6383
2016-08-03 at 10:30 AM EST
(1000/2.368)⋅2.131 = 899.91554
2016-08-03 at 5:27 AM EST
(1000/2.382)⋅2.005 = 841.72964
2016-08-02 at 9:15 PM EST
(1000/2.396)⋅1.999 = 834.30718
Great write up, @bacchist. Here's something else I'd love to see: If, instead of using the 7-day conversion, you buy on the market (possibly for a loss compared to the conversion), what impact will your increase in VESTS have over that 7-day period? At the current VEST to Steem Power rate, it seems to me we want to maximize our VEST amount as much as possible as soon as possible before the conversion rate settles down in about 8 or 9 months. If the end balance of Steem Power would be higher due to more VESTS producing more Steem Power, it might make sense to take the up-front loss on the market, even if the 7-day conversion might initially seem like a better option.
I guess I'd like to see an analysis which also takes into account the change in VEST to Steem Power conversion over time and how that would impact accounts of various VEST sizes.
My man thanks you so much for the rain tip that you send me, you are awesome dude! thanks and Blessings!
Nice. I made some profit with my real conversions as well.
Keep up the great work @bacchist
Upvoted
I'm hoping the peg gets close to $1 again. Until that time I'm not converting.
The lower the price is below $1, the more opportunity for profit. A conversion is essentially a bet that the final price of Steem (the price you sell at) after a week is higher than the mean price during that week period. But every cent below $1 you buy it for is 1% margin for error, bonus money on top of the 'bet' results.
The only reason not to bet are if the price is within the range of costs, or if the price of Steem as opposed to SBD is volatile enough that it's too risky for you. A low price of SBD only improves it.
Holy, you are right. I didn't give that much thought. Thank you
I'm still lost. I have no other wallet. So far, I have always simply used the 7-day convert function for every SBD-pennycent to solidify it as SP.
Am I doing it wrong?
Your other option is to use the internal market or external exchanges. But no, you're not doing anything wrong. You're probably getting more value from your SBD than you otherwise would.
The normal thing to do is click "buy or sell" instead of "convert to Steem". Buy or Sell gives you the market price. Convert is a kind of complicated gamble, but one which is better to do when the price is below $1.
The more people who take the "Convert" option the more the price goes back to $1 and the less profit there is to be made with that option afterwards.