Be Cautious about High SBD Feed Price Premium
There are some witnesses supporting high feed premiums (opposite position to feed discount) around 20~100% to maintain SBD peg. The rational of that move is creating more SBD as author rewards by inflating STEEM assessment. More speficially, Steem blockchain decides the degree to which SBD is printed using STEEM marketcap, and the blockchain only recognizes STEEM marketcap through witnesses' feed prices. So feed premium makes Steem blockchain over-evaluate its marketcap and hence prints more SBD. However, there are some concerns about this attempt.
The current feed premium breaks a promise with SBD conversion
Original design of feed premium is adjusting SBD conversion rate about $1 when STEEM price uptrend. So the ideal feed premium is a ratio between STEEM prices after 3.5 days and now. If the premium is too high, SBD converters will end in big losses. This is a breaking of promise by intention.Conversion is low
Since April, SBD conversion was only 1,200 SBD. Since I don't think 2% debt ratio is high, I have no worries about the amount. However, it should be noted that feed premium has no direct effect on demand side (buying SBD then converting) at the moment.The debt ratio has not significantly reduced yet
While I was not fully agree that the 2~3% debt ratio was high, it should be noted that 2~3% debt ratio was considered high enough and witnesses should discount(not premium) more in order to promote SBD conversions. (Relative post) Now, the debt ratio is about 2%. This is lower than 4 months ago (e.g. 2.6%) but it hasn't decreased a lot. If a witness was really worried about high debt ratio, he/she still has to be cautious about it now too.The market is still thin
Today's SBD volume is around $200k, and it was normally 30~40k a day. This is not a big market, and the bid debth is only $20k to the peg (around 0.00085 BTC). The amount is feasible if only one of the top 5 SBD holders decides to dump. (SBD richlist)Daily SBD print amount will be back in two weeks
The current SBD print amount is about 1/10 of as it was. The reason is changing payout period and the calculation. But this will become normal at April 29th, so in two weeks. What we need is waiting for it.Decrease of APR should come first
As written in the whitepaper, the first action against high SBD price is reducing APR to increase supply. If a witness premiums very high while having non-zero interest rates, it makes less sense.
I respect attempts to maintain the peg, but I am worried about the approach and its effects. It has no direct effects significantly on demand side. It can have some supply side effects via increasing author rewards, but this can be also achieved by just waiting for 13 days. The market is still thin so SBD price suddenly can become to the peg, while feed premium effect lasts 3.5 days more. I think what we should do is 1) decreasing APR to zero, 2) waiting until April 30th, and 3) encouraging SBD holders to sell their SBD.
Add: Didn't decline payout by mistake. I will burn payouts from this post.
The recent pumps are purely due to ignorance. It's pretty obvious from the Poloniex trollbox no one knows this is supposed to be a pegged currency. Either way, it's safe to say people who aren't aware that SBD is a pegged currency are going to pay any attention to witness parameters. They'll continue pumping till they are educated. No idea how that could be done though...
Agree, virtually all coins on Poloniex are being randomly pumped. Not sure it's wise to base a monetary policy on current events. It will be impossible to guarantee that any adjustments will have the slightest effect on whether SBD pumps on Poloniex again or not.
What should traders do to help in situations like this where the SBD is well over $1? When you say "sell their SBD" do you specifically mean on the internal market or on the external market? I have a bunch of questions I asked over here a few minutes ago. I want to help keep things in check, but it's not clear to me what the best approach is when the internal price of STEEM is so much lower than the external price and the external price of SBD is so much higher than the peg. I have no incentive to convert SBD at all if the peg is higher than $1 which, as you said, doesn't reduce debt.
Should I be selling my STEEM internally, taking that SBD externally, selling there for BTC and then just waiting for the SBD to come back down again so I can buy it up at $1 with my BTC and then convert/buy STEEM with it? And if so, and the price of STEEM rises, I'd end up with less STEEM than I started with. That seems like betting against STEEM and it seems like it would work to drive the price of STEEM down.
Sell current SBD in both internal/external markets is okay. A higher SBD price will reduce conversion, and hence will increase SBD supply until reaching to the peg. When reached around the peg, SBD conversion will begin again, and a equilibrium can be made I think.
Am I right in thinking this selling also essentially creates a downward pressure on the price of STEEM since the two are related?
No. As for now, STEEM price can influence SBD price, but SBD price cannot influence STEEM price. The below comment I suggested is linking SBD -> STEEM.
This leads me a thought. That is, users can print SBD with STEEM collateral. By doing so, SBD price and STEEM price can be linked. E.g. if SBD price is very high, one can print $10,000 SBD with $20,000 worth STEEM collateral. He/she can sell 10k SBD in the market and asking to settle his position. After 3.5 days, $10,000 worth STEEM is removed from his collateral and the rest of them goes back to him/her.
You're saying this would be something which could be implemented, much like BitShares lets users create bitUSD? If so, that would be really interesting indeed.
actually, this would be great to make sure, that SBD price is always around 1 USD. Right now I do not have SBD to sell, but I have a lot of SteemPower, which could be used as collateral.
Absolutely nobody should be converting SBD right now. If they get a worse deal on it, they should have known better than to convert when SBD is trading at a premium to $1 anyway.
So the SBD price on the exchanges is being manipulated by witnesses?
No. Some witnesses input higher STEEM price to the blockchain, and the blochchain will (if majority of witnesses do this) print more SBD/STEEM as author rewards. Now, 7 witnesses out of 21 are doing this. Check here and see "Bias" column. https://steemd.com/witnesses
I am not complaining, but technically speaking, as far as I know, CLI through API
comment_optionsalways allows to set lowermax_accepted_payout, so you should be able to always mark your post with "declined payout" even after 6 days :)Oh good to know. I will do. Thanks!
Failed :(
so maybe I was wrong :/ I will double check
Sorry. I didn't want to confuse you. Just I mentioned this in a spirit of learning.
so actually, what is the reason behind so high price of SBD? Just price feed?
Should we sell all SBD (which we sell can above 1 USD)?
8.92 SBD was converted to 44.3 STEEM and burned.
https://steemd.com/tx/dbfdf0cd07fe8bfcd96fcb635a68f7d7187303cc