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RE: Now Is the Time to Reduce Feed Price Discount
"when STEEM price is rising, demands for Steem Dollar increase"
I kind of thought it was the other way around.
-When the price is decreasing, people hedge by selling steem into sbd because it will bring more steem later.
-when price is increasing, people would buy steem with sbd because you get more steem now than later.
I also don't understand how the debt gets canceled in the first place. How does trading on the market destroy sbd? Can you point to some information about this?
Good point. I think that makes sense but investors seem more like to hedge STEEM by BTC or fiats. The reason maybe at this moment SBD is just a STEEM derivative so is not free from STEEM price. When SBD has its own usage more broadly, like buying cereals or coffee, it would be a mode of hedging.
To destroy debt (SBD), you can convert it into STEEM. I do not mean selling and buying in the market. It is blockchain-level method. Check your Steemit wallet and expand Steem Dollar menu. You can see Convert to STEEM
yeah, with btc making upwards moves that makes sense. Thanks for clarifying
It is actually somewhat peculiar that SBD demand would increase when STEEM price increases. There is no real mechanism by which this should occur, other than reduced risk due to the higher STEEM price reducing the debt ratio, but (for the magnitude of price increases we've seen) that is reasonably negligible. It may simply be self-fulfilling in the market (people expect it to happen, so they trade on that expectation, and it does happen). Likewise there may be some bots that in a similar fashion trade on observed correlations that have become self-sustaining. In time I expect this effect to reduce.