Daily Discussion No. 6: What is UP with SBD? And is This Going to Last?
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Last I Checked SBD was Trading at $12.53 on Bittrex!
Blooming cactus
Of course, I could just leave this alone and celebrate (along with a bunch of other people) that the Steem "twin" currency has gone to the moon.
But something about this strikes me as a little weird.
Or, at the very least, it points to a flaw/miscalculation in the Steemit system.
As best I understand it, Steem Dollars (SBD) isn't even a "real" cryptocurrency. What I mean by that is that Steem is the official cryptocurrency around here, while SBD is merely a form of "internal settlement currency" used to pay the "cash" version of our rewards.
Also, "as I best understand it," SBD is supposedly pegged to US dollars at a 1-to-1 ratio. And it has been like that (with minor fluctuations) for the entire ten months I have been on Steemit.
Until about November 21st...
Then a Funny Thing Happened
Mint blossoms
On November 21st, but Steem and SBD started ticking up, rather sharply. Of course, November 21st was also the day Korea's UpBit cryptocurrency exchange listed Steem and SBD for trading, for the first time.
Maybe that's coincidence, maybe not.
But it has been pretty much "off to the races" for both Steem and Steem dollars since November 21st, with the most spectacular spikes happening over the last few days.
Noteworthy in this picture is the fact not only the prices are up, but the trading volume is many times the average over the preceding 4-5 months.
Mistaken Identity?
Purple heather
As I step back and look at the skyrocketing price of SBD-- and the fact that almost the entire issued supply is "churning" on a daily basis (the last 24 hours' worth of trading on Bittrex alone was US $32 million+!), maybe this whole thing isn't really so much a "pump and dump" as a case of mistaken identity.
Maybe a whole bunch of these trades are being done by people who are not even familiar with Steemit... they just see a coin on an exchange, and start trading it.
And because SBD has a small supply, it's super easy to run up the price.
Think about it: there's only about 3.6 million SBD in circulation. At 1-to-1 with US dollars, that's only $3.6 million. That's pretty modest, and it wouldn't take a whole lot of speculating by day traders to set that going... without any of them even knowing that it's our internal rewards currency, here.
Just something to think about.
Another thing to think about: Is the fact that SBD is traded on external exchanges inherently a problem when it comes to trying to keep the value of SBD at $1.00? There's no control over what external traders can do...
What do YOU think? Is this spike in SBD caused by a case of "mistaken identity" that has little to do with Steemit? Do you think someone is trying to manipulate the market? Or is this just a case of FOMO among people who aren't connected to the site? Do you think we've seen the highs in the SBD price? Do you think it will ever go back down to $1, like it was intended? Leave a comment-- share your opinions and input-- be part of the conversation!
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Created at 171208 17:20 PDT
While I might be wrong could this also be some way to fight vote bots? I'm not sure of it would influence this but since steem dollars are so much worth why even bother using the on bots in the first place?
Or maybe because bots became so attractive people started buying steem dollars to pay for them? Just throwing out some newbie thoughts here.
Very insightful, but not correct I think. In fact I believe the opposite is true. People who run bots which in particular use self voting or collusive voting to up vote other bot account, they would always choose to get as much liquid rewards as they can so they can sell it quickly.
Since the SBD price is up and you can get half your post payout in liquid SBD, this has make scam bot accounts more that 500% more profitable.
This is a bad thing 😭
Both good thoughts @holm. I don't know. But there's a question mark by the fact that daily trading in SBD has been as much as 40 million USD... which is much more than even the biggest whales are likely to influence. But I am not an expert... but maybe we will learn about it, in time.
You know what's funny is, as I was reading this I had absolutely no idea that SBD went that high and I have no idea why I haven't checked to see where it is right now. As an instrument that is supposed to be pegged at 1 USD, I'm mystified at its value. It sure is exciting but at the same time I'm not holding my breath that it will remain in the double digits.
Then again you do have a point about people trading a "new" cryptocurrency. The market is all about supply and demand isn't it? With a fairly small supply I can see why the price would go up but I believe the wrong sister token is going for that joy ride.
I agree... it's the wrong currency that went for a joy ride... and I find myself wondering if STINC will take action to have SBD delisted externally... in other words, the only way to cash in your SBD would be to use our internal market to change to Steem, which you then could sell on exchanges worldwide.
Of course, the $12.50 exchange rate isn't costing us anything... the cost is being borne by external investors who've decided what the "right" price is. Will those investors bail when they discover they are basically underwriting a bunch of bloggers? Time will tell.
I think you raise a valid point about "FOMO." That's happening on all crypto fronts right now. It will plateau out eventually without too drastic a nose dive, hopefully. Yes it is "pegged to one USD" but i never took that to mean "pegged for eternity." I am no expert, clearly and have only seen price fluctuations for 6 months not 10. 🙄
Even as a "pegged" currency, I'd expect to see +/-10% fluctuations on a daily basis... but the current situation is nuts.
Ive read earlier on that the supply of sbd is way less then the steem..hence the high price spike. And to sell if higher than $13.5...otherwise hold ur sbd.😃😃😃
Yes, the supply is quite small... 3.6 million coins, or so.
It seems likely to me that this is being driven by the Korean market... the volume on Bittrex has been MUCH higher than Poloniex (even with wallet issues) and Bittrex is partnered with UpBit which suggests a connection there.
So in the future..this will be the deciding rate for sbd? Somebody or some people are definitely buying sbds.
I'm afraid your guess is as good as mine. I suppose it will depend on how concerned the witnesses and STINC are... one possible outcome might be the delisting of SBD on "external" exchanges, making it so that we could only trade SBD for Steem in the internal market, and then trade Steem on the other exchanges. But that's just speculation. For the moment, just going to enjoy this as a "holiday bonus."
Well..getting 20 steem for 3sbd was fun🤣😋
Interesting thought about the raise of value of SBD and Steem.
Where does the production of SBD comes from? Can we produce more of it?
A lot of people believe in this platforms, corrections related to bots are happening, things are improving, I feel a lot of positivity. The value will surely go up.
I wonder what happens if in 1 year I decide to cash out the entire value of my profile.
Yes, witnesses have the tools to increase the supply.
I heard that some witnesses are 'biasing' SBD as much as 900+%, in order to increase the supply, and restore the peg.
You don't need to hear about it, you can check! https://steemd.com/witnesses
You can see that only one witness is doing that in the top 20 is doing that, @pharesim, and only two more above 0%, @netuoso is at 300% and @smooth.witness at 100%. This means there is a strong consensus for 0% for the moment.
I should note that the crazy outlier here at position 31 is @abit at 9900% !!!
I feel quite positive about the community, as well... and I think the Steem coin was overdue for some upwards price movement. The SBD? That's somewhat of a surprise and a bit of a mystery... but it amounts to "supply and demand" in the end.
I suspected a pump and dump when I first started seeing it go on a while ago. Still no clue why its going out of control. Can only hope some one else has answers. Everyone keeps saying to sell it and yet it just keeps staying above its 1$ tether.
The mechanics seem simple enough... it starts as a pump and dump, except a bunch of outsiders see a currency that has been very stable, for a very long time suddenly take off. So they jump onboard, having NO idea what "SBD" actually is... because supply of SBD is extremely limited, demand suddenly outstrips supply by 10x and the price rockets. The witnesses-- who are (in part) tasked with keeping the currency stable-- can't do a thing about it, even though they may be whales, their holdings are chump change compared to a $30M+ daily volume.
I think it's going to have to run its course AT LEAST till volume dies down to a dull roar. Then the witnesses might be able to flood the market with sell orders and cause a bunch of external people to take profit. But that's a tricky manipulation, and you also need a "wall" of buy orders around $1.10-1.20 to stop the bleeding if it truly falls off a cliff.
And this is just experience based on trading "pink sheet" stocks a long time ago... cryptos may work differently.
If indeed it is a case of mistaken identity by investors, that just makes it a happy coincidence for all of us steemians. It is weird but I have a feeling it will correct itself. Who knows!
I think there's a chance it might correct itself... or get nudged back into alignment with a little help from the witnesses... once the volume settles back down. It'll start "drifting" lower, and then a bunch of profit taking will cause it to go down some more. Will it get back to parity with USD? Hard to say... I've seen it come back to 89 cents after being briefly up around $2.30... but this is a much bigger drop.
Its weird though . I Can't really understand what's really going on .
For the time being, all we can really do is watch...it's a wild ride, to be sure.
Unless it can be used by traders it doesn't have much use. But because of the pump / dump vulnerability you have identified correctly as being especially fragile considering it's small market cap, it is hard for witnesses to do anything about it in particular when the value increases a lot.
However witnesses are not doing anything about it, at all. It's true that they have limited tools to force downward pressure, but more importantly they are against using them to correct short term spikes. I think this restraint is good, though we should still be asking them questions about it.
In the medium to long term though, if SBD continues to trade well above $1 USD then I think we have a problem. Mainly because it is not fit for purpose, and I'm teasing out the other details in chats and my posts.
My opinion currently is that if it does not in a matter of months then we need to consider what it's utility is beyond yet another coin for speculation.
There is something we can do if we want to both try to maintain the peg and go long by trusting in Steem, i.e. something that is in our interest: always get your post payouts in 50%/50% SP to SBD, and sell your SBD for Steem in the internal market.
Here's one for you: would you prefer to see your Steem based assets increase in value or you SBD assets?
An interesting question! I note that SBD are produced and distributed via author rewards, unlike SP, which can be gained via curation. This means that SBD are a vector for distributing wealth to content creators, which tend to be not whales. Whales certainly get the majority of author rewards, but they get a far higher percentage of curation rewards, and I believe high SBD prices tend to reward minnows proportionately more than SP based rewards, which are skewed to whales.
Were it not for votebots, I would be fully in favor of this situation. However, I reckon that payment for votes in SBD is dead at these SBD prices - except for non-minnows. Whadda you think about that? Will votebots continue to thrive even though it costs so much more to buy votes in SBD now?
Yep, this was one of the first points that I heard that made me take notice of the issue. However since taking notice it's occurred to me that this also incentivizes self voting and scam bots by the same stroke. @remlaps has observed some data which suggests that people are self voting more since the price hike.
Yes, it seems that paying for anything is made difficult by the price volatility, so if the price continues to be unstable, rather than if it continues to be high, then it will put a dent in vote buying. Again, I presume people are seeing a better return in self voting and cashing out SBD, so maybe paying for SP delegation and then self voting is the cynics way forward, if you can get SP delegation at a reasonable rate.