Realizing that there is still a great deal of confusion about how the Steem Dollar (SBD) will self-regulate and whether it will fall back to $ 1 in the medium to longer term, let me briefly explain the mechanism behind it. You're welcome to add your comments if I'm wrong.

The Inflation Rate

With a current supply of 3.92 million SBD, 53,000 new SBDs are produced each day. That's 19.37 million SBD per year, which corresponds to an annual inflation rate of of around 500%! Against this background, it should be clear to everyone that the SBD will decline again in the medium to long term. Unless the demand remains immense for a long time.

The Regulatory Mechanism

How is the regulatory mechanism on SBD done? While the portion of the rewards in Steem is always paid out at the current rate of the Steem, the SBD is always paid as if the value of the SBD is only one US dollar.

Example: You got votes over $ 2. Then you get 1 SBD, no matter what the course is. You will receive the second half of the reward in Steem at the Steem daily course. At a rate of $ 2 per Steem, this is 0.5 Steem. Take a look at your rewards and you'll see it.

The SBD is thus treated even at high prices such as 1 US dollar. Calculated in US dollars, the author is currently paid much more than if the course of the SBD is only $ 1.

Inflation is currently very high because there are only a few SBDs at the moment. Why? Because they were destroyed at previously low prices via the function "Convert to Steem". At current high prices, SBDs are no longer destroyed (selling at the current rate is much more lucrative), so their numbers are rising very fast. If the price falls back below $ 1, they will be destroyed again by the function "Convert to Steem", and their number will drop again. It's a great regulatory system, right? (Note: For the time being, this feature has been removed from the frontend, meaning that the steemers who have no crypto experience will not sell their steem below its value and not to destroy even more steem.)

Why the Overvaluation?

The reason why the SBD is completely overvalued is, in my opinion, that at the moment people buy, who have no idea about the matter. This shows that we are in a kind of a housemaids-boom of crypto currencies. It will not be the last hausse. The proper housemaids-boom might come in 2 to 4 years.

If the article helped you, I would be happy about many votes.