STEEEM DOLLAR Purge Update : Have we reached the New Normal?
A lot has happened since I last wrote about the STEEM DOLLAR Purge which began in August when the price of SBDs finally broke down below $1 USD. It’s only been a couple of months since I urged This is what we need to DO and while the market has been fairly steady over this 2 month period, we have had Hard Fork 20 released on the blockchain which has effectively raised the Debt Ceiling so that printing of fresh SBDs (System Debt) can be resumed. It’s still too early to pass judgement on this change and while I remain opposed, it’s done now and there’s no point crying over spilt milk. Today I wanted to have a look to see if the Purge has so far successfully reduced any of the System Debt by putting a dent in the Circulating Supply of SBDs.
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The first chart I wanted to have a look at was the daily SBDs which have been converted back into STEEM over the last couple of months. As I have explained previously, this conversion process effectively destroys SBD and reduces the Circulating Supply of SBDs – thus the System Debt.
You can see above that there have been a few different stages of the purge and it’s been a bit of a Stop / Start affair. The initial purge began in August, but I have labelled the two subsequent stages on this chart as Purge 2 and Purge 3. These purges are correlated with the SBD price which has dropped below $1 USD for sustained periods in mid-September and early-October. You can see this correlation on the SBD chart shown below.
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The good news is that the price of SBD has found support and has been relatively stable either side of $1 USD over the last couple of months – which is where it SHOULD be. For the most part it has fluctuated between 0.92 and 1.08 which means that it is once again functioning as a relatively effective “Stable Coin”. I’m tempted to go into a rant about Tether here and other Stable Coins, but these are topics for another day. For now at least, I am reasonably comfortable that the SBD is holding its value and is a relatively safe place to store crypto wealth….so long as the System Debt level remains manageable. Speaking of which, you can find out the System Debt level in real time at https://steemworld.org just click on the “Steem Info” button and you’ll see this :-
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The bad news is that we still have a high System Debt level at around 6.29% at the time of writing and as of Hard Fork 20, we are once again adding to this. As a result I do consider that there is now a very high risk that the System Debt level will eventually hit the 10% level where a haircut to conversions will be applied. We might get there very quickly if we get a sharp drop in the STEEM price, or we might get there gradually if printing continues and we don’t see further sustained purges via the SBD conversion process.
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However, it is possible that we have reached a “New Normal” state where an equilibrium is found which balances the newly created SBDs with conversions back to STEEM occurring at an equal rate. It might sound like wishful thinking and I think it is unlikely, but it is definitely possible. I remain disappointed that Steemit Inc has not yet re-enabled the SBD Conversion function via the User Interface, and of course I opposed the raising of the Debt Ceiling via Hard Fork 20 but I have come to the conclusion that my opinions here are largely irrelevant. I’m actually happy to be proven wrong if my concerns turn out to be unfounded. Good luck to you if you’re still invested.
10% debt is reasonable when fundamentals and market depth allow for low % lost on large volume SBD conversion to steem to btc to usd. I don't think we're there yet.
The economics of Steem and SBDs are intriguing. I hope to hear more from you on this topic.
Check out the video I posted. In it, I talk about my macro outlook on the markets. https://steemit.com/stockmarket/@cryptomeeks/l7hdncjv
Thanks. Good job with the video.
Thanks for checking me out!
As always fella, the voice of reason and makes perfect sense to me, your opinions are not "irrelevant" to some of us.
Stable coin = good, over production of debt = bad....
Maybe this is the happy medium?? I'm guessing not, but some folks are just happy to play along with the game and make a quick buck rather than long term and continued profits.
You've hit the nail on the head I think. I remain hopeful that this is going to be the new happy medium, it just feels a bit more unstable and risky for those who don't understand how the system works (which is probably 90+% of users). Just like how debt works in the real world.....it's all fine and dandy....until it isn't and someone is left holding the bag.
With the rewards model being that 50% of reward value is paid out in SBD (debt), there will always be upward pressure on the debt ratio, and if things stay the same in the market for any extended period, the STEEM price will not be rising at a rate (if it rises at all) quick enough to stop us reaching 9%, where the print rate will begin to reduce towards zero at 10% . With no conversion option readily available, it would at least be nice to have an option to receive reward in STEEM and SP, rather than SBD and SP.
But as you say, we are small voices, and it is best to leave it to the experts and economists (if they have any) of STINC to navigate things their own way.
I guess the presence of experts and economists amongst STINC and the Top 20 is what I am really questioning. We can call the system decentralised, but those are the ones in control here and they are going to navigate things their own way no matter what the rest of us think about it.
The market and the people voting with their feet will be the ultimate judge in time.
I don't even know how to do the SBD to Steem conversion of which you speak. The only thing I know how to do is go to the market and trade it for Steem... which I do. I still think SBD could drop lower than it is. Or I think Steem could rise, so I convert it when I get it. Then I power it up!
SBD is supposed to be at least $1, but once in a while it goes bit down.
I'd say it is doing fine job of being stable currency on steemit.
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I think that is the issue. This conversion feature is not well understood or accessible to the bulk of the regular users on the platform. Maybe that is intentional.
How do you do it?
The easiest way I know is via https://steemworld.org (Balances -> Convert SBD) but you can also do it via https://steemconnect.com if you know how to put together the URL.
Good to know! If the price of SBD drops significantly again, I'll have to give it a try. It would be fun to get to try a new way of converting it rather than just using the market. And it would lower the debt!
I do the same
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I don’t really understand the need to create more debt. I’m guessing someone benefits...probably not the average user
The SBD debt mechanism is what gives us a stable coin for commerce, that we can use as a true liquid currency. I am a firm believer that we need it to attract merchants and velocity of money in the crypto ecosystem.
However, on current implementation we have more than what we need because people are hoarding it for the possibility of an asymmetric trade if we get another SBD pump. So there is more SBD in circulation than is really required.
It's a bit complicated. In short - We need a small amount of debt, but we don't need this much and if we have too much it can cause us bigger problems.
I just added another 600 steem (450 EUR) to my account. Fingers crossed.
Good luck my friend. I sincerely hope that the faithful, like yourself, are rewarded for their support.
I just exchange my SBD for Steem on the Market on my Wallet and get a nice 20% return on my SBD
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