RE: Steemit! - A Speculators July 4th Trading Strategy
Below is the order book for bittrex, which has the highest volume, as you can see the sum of all the bids is only equal to 14.248 BTC which is currently worth around $10,000. Unless there are some hidden orders in there, someone could send 14.248 BTCs through and cause a flash crash wiping out all the bids.
Actually, they can't. There is 14.248 btc in the orderbook, but all of that can't be bought on the market price. The sum is 1 0966 480 steem, and that is much bigger than all liquid steem. So it is true that a whale can bring the price down significantly, but it's impossible to bring it down to zero.
A good strategy for someone receiving a payout would be to hedge against a potential fall by going short Steem prior to the payout and continue holding short, cashing out their Steem Dollars into Steem and then selling Steem into BTC. However I don't think this is possible, on poloniex you can short a few of the crypto currencies on there, it does not look like an option for Steem at the moment.
If somebody thinks that steem price is going to fall, and there is no possibility to short it... then what's the next best option? Of course to exchange it to either fiat currency or to some price stable cryptocurrency. And guess what? Steem dollar is ideal for that!
So it makes sense to save all your SD if you think that steem price will go down. And on the other hand, if you happen to have steem and think it might go down, it makes sense to buy SD with it. That can be done easily and for free in the internal exchange. This has one really big advantage: the money stays in the ecosystem. Users don't need to sell it for bitcoin so it doesn't affect the price.
And then there is the interest. It can be adjusted by witnesses, but apparently it's starting with 10 % which is huge! Make easy money just by holding SD. I wouldn't be surprised if there was big buy pressure for SD because of this.
One really interesting piece in this puzzle is the liquidity reward. It should make sure that there is always at least some liquidity in the internal market. That is a strong force to keep the Steem dollar worth one US dollar.
July 4th is big unknown so probably there is a lot of volatility. It means that active traders will have a lot of arbitrage opportunities.
Thanks for the heads up on the sum of all the Steem bids, I didn't realize. there must be some incredibly low ball bids in that orderbook.
I agree, I think the rational thing for someone with Steem to do now would be to buy Steem Dollars as soon as they could to protect against any price move. I haven't yet taken the plunge, but will buy if I'm right on the move down after 4th July.
The 4th of July is unknown, it's also probabilistic I'm not predicting any outcome, just what I think the most likely outcome will be. There's also a case to be made for a huge increase in the price of Steem, I'll have to trade that differently if it's the case.
Am I right in thinking that there is no way to sell SMD outside of Steemit?
CG
I thought we killed the "M"?
We did, but I dunno, I kinda like it :-)
CG
AFAIK Blocktrades will be implementing it to their system. Maybe it will be on Bitshares too?
Now that I thought a little bit more about this... Of course it will affect the price if people are selling Steem. It signals the markets that people value SD more than Steem. But it doesn't directly have effect on BTC/Steem-pair where probably most witnesses are getting their price information.
Anyway, it's great if the money stays in the ecosystem. This doesn't happen when people sell their Steem for BTC. It will be also interesting to see how much traders are going to use SD/BTC markets.