RE: STEEM DOLLAR Will Fall To $1 USD : Here’s Why
Hello @buggedout, i read you article, and i also wrote one with my economic perspective, and i wish that your read it too, so we may improve this discussion. (BTW, i agree that a high SBD price will damage the system)
But i have one thing to point out on your analysis:
Wouldn't the destruction of SBD increase the price? Like you said, SBD conversion to Steem destroy SBD, reducing its supply. I think the effect would be the opposite.
As the basic supply/demand economic law states that shortage of something makes it price increase, the destruction of SBD would have the opposite effect on its price.
If you add to the equation an increase of SBD market cap, that would also mean a demand increase, wich also drive the price up.
I don't think Venezuela currency would be a good comparison, because there is some weird government influence over it, and supply and demand isn't exactly what if defining its value. If you check the chart of USD/VEF, you will see that the price doesn't move as other currency markets.
SBD actually is more valuable than a USD, not the opposite.
And one thing that maybe you didn't took in consideration on your analysis is that between Aug-Nov of 2017, the demand for SBD pretty stable, as can be seen on alexa.
At December, the traffic towards Steemit.com increased a lot, driving the demand for SBD and STEEM a lot higher.
The situation with the SBD price is a consequence of demand.
Check my analysis, let me know what you think.
The rate of printing increase is because of the steem price being high, and that's how it is designed.
About 2 and 3
What i understood here is that he thinks that the high supply is devaluating the currency, wich is true, but that doesnt make SBD on hyperinflation, since the demand is still high.
The destruction of SBD (conversion) become avaiable below 1 usd exactly to avoid the hyperinflation, because It reduce the supply, increasing the value, and to help avoid that the sbd lose value.
One of the reasons bolívares have hyperinflation is that the venezuelan government force its value lower than the dolar. It isnt the market supply and demand that cause the inflation.
And yeah, the printing in itself doesnt make a currency less valuable. I think the system is working Fine. Its only a question of high demand. When we reach the point where there is more SBD on the market than people are willing to buy, the price Will naturally fall.
Ah okay, I think we are agreeing here. The point of contention is that perhaps it is wrong to label this as "hyperinflation" from an economics point of view?
I think so, because at this moment SBD have a high value, and not the opposite.
An price increase would add more value to it actually.
But If the price is lower than 1 dollar, then SBD lose its value, and the blockchain have systems in place to Bring the value up again (the conversion mechanism)
That is true if starting at $1. If you are starting at $10, then the currency can still hyperinflate and lose 90% of its value.
But the reason of SBD is exactly to be as close as 1 usd as possible, and when the price os above 1 dollar, the inflation increase exactly for the purpose of devaluate the SBD.
The hyperinflation would only occur if, when below 1 usd, the sbd would be printed at the same rate as now, on a continuous devaluation of the coin.
When below 1 usd, the mechanisms of deflation kicks in (less SBD printed, and the possibility to burn SBD through conversion)
We dont have hyperinflation right now, and we wont have hyperinflation when price os below 1 usd.
SBD Will never become Fully pegged to 1 usd, and like other strong currencies (usd, Eur, yen, and others) It doesnt have to be. But also It Will never rise in price nor lower in price forever because of the economic mechanism that already are in place on the system.
Also, allowing to convert SBD to steem now would burn SBD, thus increasing scarcity and driving the price up.