RE: This biggest reason steem prices are falling: The Arbitrage Sabotage Steem-Dollar Teeter-Totter
Excellent post like always. I just love how you always say the truth and point to weaknesses of steam. You do it with a solid background and excellent explanations. But with honest intentions for better of steemit and you jump in constructive discussion about it.
To be honest I don't have a lot of mathematical knowledge and deep trading or market knowledge almost at all.
Reference: SD (steem dollars internally, SBD steem dollars on external market)
Similar conclusions as yours occurred to me. Since trading of SBD is available for trade on poloniex things you are talking seems to swirl in an ongoing circle. I was also surprised (as is one of your commenters here) when I saw SBD implemented on external market and was unsure why could something like that happen. I with my ignorance was sure that SD could be sold only to buy STEEM or to be traded internally on the platform.
After that, I came to a conclusion that SD in a way of SBD on another market is a good thing to prove its own market value.
But then I had a revelation when I was reading your post and comments. If we can trade SD in means of SBD on other markets we drop the value of STEEM because it just becomes obsolete since it's easier to just pump your SD out and trade them for what ever like. Now the internal market is a good way to get SD(or SBD) for your STEEM because users that want to have steem power will trade it internally and are willing to pay a bigger price either because it's more convenient or because they are ignorant.
This in fact as you pointed out in your post brings the price of STEEM down and it will be flat to 1 SD or 1 SBD if there is no bigger demand for steem on internal and even more on the external market. So it looks that STEEM by design is created to be worth 1 $ because of his twin brother SD unless there is big market demand for STEEM. Since both are liquid and SD is more convenient to use in a way of SBD since you don't have to convert it or buy it internally first.
This for me explains the circle of ongoing sales on which some profits through current means of arbitration.
Sorry if I'm just completely wrong, but I just like your content, points, and discussion on a table and this is just my uneducated opinion.
I appriciate the kind words.
WHat youre describing is called gershams law. Bad money chases out good. that is to say if one type of money is better (either because its likely to increase in value or because its less likely to decrease) people will hoard the "good" type of money and spend the bad type of money. This is precisely what happened with gold coins in the latter part of the 19th century. (because gold was increasing in value more quickly than silver)
Thi shas played a role, but its a symptom as much as a cause. Because the thing that makes sbd better than steem is the fact that steem is declining in price. In early july, im sure steem looked like the better money