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RE: STEEM Dollar Purge Update : The Bonfire has been lit!
Hey, @buggedout.
I noticed the uptick in the percentage of SBD debt on steemworld, too, which I guess is confusing me, since as you say, there are quite a few of us who are taking the SBD and converting it to STEEM.
I know you explained it, but I'm still not getting why burning SBD would not make the debt ratio go down, rather than up. Besides, it's something I've been doing from the beginning, so I can power up the STEEM.
As of right now, too, STEEM is below $0.46 USD and SBD has fallen below $0.90.
Converting SBD reduces the outstanding debt total and if the STEEM price remains the same then the % debt is reduced. However, if the STEEM price drops, the market cap drops and the percentage of the market cap that the outstanding SBD adds up to goes up.
This is where the negative feedback loop comes in. SBD price drops, people convert to STEEM and sell STEEM, then STEEM price drops from the selling...debt as a percentage actually goes up. As long as the SBD price remains under conversion value (currently $1 USD - but not for much longer) this "Purge" of excess SBDs will keep going and arbitrage players will smash the STEEM price.
Okay. Got it. I probably should have figured that out on my own, though, so thanks, but sorry for making you walk through it again. I guess I wasn't tracking the fact that the percentage goes up if the price of STEEM goes down.
Just how much of an effect are we having on the STEEM blockchain when we convert our earnings from SBD to STEEM? Because, we would all be holding STEEM, right, or does the nature of it change when we power up like I've been doing. In other words, if I were to keep it all out as STEEM (aside from it obviously affecting what I can earn with the lower SP), would that help the debt ratio any? And not just me but thousands of us?
If you mean that everyone selects 100% SP as a post reward instead of 50/50% then - YES, the system will stop producing SBDs and that will assist in the debt level management.
Considering SBD is currently trading at about 0.90 USD it is probably a smart move to be doing this and powering down instead to get some liquidity if you need to spend.
What if by reaching 10% SBD debt ratio instead of implementing thehaircut we start to convert SBD not to Steem, but to Steem Power ( but with 100% ratio, no haircut ) ?
So for those who are powering up there'll be a clear intensity to keep on buying and converting SBD all the way down ?
This is an interesting idea but I think it's still open to exploitation by big players. If they are converting less than 1/13th of the value of their SP they can just power down to turn it into liquid STEEM. We'd just be slowing them down by 1 week - but that may have some value in itself.
Well it looks like this exact situation is sort of playing out. I feel like this happened in late 2016 as well.