How To Benefit From SBD Being Stuck Below 1 USD?

in steem •  last year  (edited)

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The Steem Backed Dollar (SBD) is a stablecoin pegged to the US dollar. The Steem blockchain has mechanisms in place to limit the supply to maintain the peg. One mechanism is that the share of liquid rewards paid in SBD instead of STEEM will go linearly from 100% to 0%, beginning when the market cap SBD (= the USD value of all SBD in circulation) exceeds 9% of the market cap of STEEM+SBD until the ratio reaches 10%, after which no SBD gets printed. Another such mechanism is the conversion process that has a 3.5-day delay built into it. When you convert SBD to STEEM, you get 1 USD worth of STEEM for each SBD converted. In the conversion, the SBD is burned. It's removed from circulation.

The price of SBD persisting below 1 USD presents an opportunity to earn through arbitrage. What you can do with your cheap SBD is convert it into STEEM. You will get more STEEM than you would get by trading your SBD for STEEM on the internal market or cryptocurrency exchanges. What you do next, is buy SBD with the STEEM you got. As a result, you'll have more SBD than you began with. Rinse and repeat. As long as SBD stays below 1 USD, you will gain. If everyone does this, it will help stabilize the value of SBD because SBD will be removed from circulation which in turn will lower the SBD debt ratio (= the market cap of SBD divided by the market cap of STEEM+SBD).

[Edit begins]

The conversion functionality was removed from the Steemit wallet about a year ago when the price of SBD was really high to prevent people from using the conversion functionality to what would've been their great loss at the time. Now the price of SBD is significantly under 1 USD, which means that the conversion is provitable PROVIDED the price of SBD will 1) stay below 1 USD for the duration of the conversion AND 2) not crash because of the debt ratio exceeding 20% among other things.

[Edit2]

The conversion mechanism will not stop at any stage but the peg will effectively be broken when the debt ratio exceeds 10% and not 20%. We're most likely about to see SBD go into a free fall soon.

[/Edit2]

Here's how you can initiate the conversion of SBD to STEEM using SteemConnect:

https://steemit.com/sbd/@timcliff/how-to-convert-sbd-into-steem-using-steemconnect

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How do you convert sbd to steem? I always just go to "market" and buy steem with my SBD is that wrong? Also, I just did this with my SBD and got 450 steem. Are you saying now I should buy SBD with that? so confused lol.

You were supposed to be able to do that using Steemit.com by clicking the little arrow next to the Steem Dollars in your balances. But the option is no longer there. For the longest time, there was no reason to do that because the price of SBD was way above 1 USD. I have to look into this.

  ·  last year (edited)

I knew that used to be a thing, I wonder why they did away with it. Without it does SBD still have a way of burning? Cause if not that could probably be part of the reason for the price loss.

It can be done using SteemConnect. It is still possible to do. They just took it away from the Steemit wallet because some people were using it when SBD was worth several dollars which was a costly mistake back then.

See: https://steemit.com/sbd/@timcliff/how-to-convert-sbd-into-steem-using-steemconnect

$rewarding 25% 15 min

Oh that makes a lot of sense. Except "$rewarding 25% 15 min" that part I don't understand.

That should cause the @rewarding bot to upvote your comment when it's 15 minutes old on my behalf. Why delay the upvote? Because under the new rules that came into force in HF20, your curation rewards from a comment you have upvoted are partially or wholly lost to the pool if you upvote the post when it's not at least 15 minutes old. As the author, you'd get the part of the curation rewards I'd lose, which I wouldn't mind. But losing them to the pool is not cool. @holger80 coded a helper bot to set this right.

then what do you do with the steem? buy more sbd or just keep it liquid in steem? and yea, what does rewarding 25% in 15 min mean lol. I can't believe I traded all my sbd without knowing this. But this is awesome information.

Then you immediately buy SBD with the Steem. Rinse and repeat. You'll be making profit as long as STEEM doesn't collapse totally and as long as it SBD stays under 1 USD.

I explained the rewarding thing in another comment.

thank @markkujantunen . How do I buy that sbd? In the internal market?

@markkujantunen I tested it with 4sbd. So my question is this: Where do I buy my SBD? Do I go to the internal market and sell my steem for SBD?

And, if I were to sell 2000 steem for SBD on the internal market and then do the sbd trick, how much do you think I will benefit on the transaction if the price of sbd is $.93

You can buy SBD on the internal market or a cryptocurrency exchange or Blocktrades. But please note that I was mistaken about when the conversion mechanism guarantees getting 1 USD worth of STEEM for each SBD burned. Getting that amount stops being guaranteed when the debt ratio exceeds 10% and not 20%. Because the spot prices of SBD and STEEM are already what they are, the 3.5 day average of the debt ratio is certain to fall to 10% in two or three days even if the price ratio does not change. I started converting my SBD a few hours ago and plan to trade any SBD rewards coming to me to STEEM right away without waiting for the conversion. Unless the price of STEEM makes a radical turn upwards, I consider it likely that the price of SBD will collapse in a matter of days.

thanks. I didn't see it so I thought I was going crazy lol. I really want to learn how to make the most of my steem and sbd. I'm not good with that. I just post and earn and probably don't convert in the most efficient way. Now I'm stuck with 450 liquid steem. But at least I earned that. I bought in way to high and am trying to rescue my money with posting lol

Ahh, I wish I knew about this just a couple days ago when I bought more STEEM!

To think that such "undocumented" functions are accessible through Steemconnect! And I just recently found out about its 3 STEEM account creation tool too.

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Gosh! The more I read the more confused I have become! LoL

Cheers.

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The Steem Backed Dollar (SBD) is a stablecoin pegged to the US dollar.

It's currently at 93.7.
A shift of value (up or down) of 7% in a few days, does not make it a stable anything.

Just saying.

Compared to any non-stablecoin it is a paragon of stability.

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We have a problem, Huston.
lol

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