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 7 days ago 

My obivious concerns being:
a) that we've not seen the bottom yet
b) that would be over 50,000 SBD selling pressure... which actually is less than 10% of the daily volume on HTX.

I never understood what was going on at upbit, but IIRC the crazy-high SBD prices started after that exchange added a trading pair, and seem to have gone away now that they shut down again.

Right now the price is nearly stable in comparison to the haircut threshold... ( $0.179 / $0.262 ) ~= $0.68, which (I believe) is roughly the same price you'd get if you used the blockchain's conversion mechanism. I don't think that's a coincidence.

Going forward, my guess is that the price will be loosely pegged to the price of STEEM as a ratio of the haircut threshold when STEEM is below the haircut threshold and loosely pegged to a dollar if the STEEM price is above the threshold. So, it might not be a bottom, but I think there are practical constraints on how low it might go.

Of course, that guess could be very wrong...

If the SBD ratio drops below the haircut ratio (and stays there), it would make sense to use the conversion function, instead of selling on the internal or external market -- which would not create selling pressure and would have the side-effects of reducing the SBD supply and increasing the STEEM supply, which would tend to drive the exchange price back towards the conversion ratio.

 7 days ago 

What's this haircut threshold and how does it work? I don't understand justyy's post and haven't heard about this before.

There's a pending trade on the internal market to sell 1.2m STEEM and buy SBD. I really don't understand what's going on at the moment!

This is going to be rushed, so I'll try to come back later and clarify, if needed. Overview:

  • At any time, SBDs can be converted to STEEM by the blockchain. That's what justyy is doing. The SBD gets burned, and the STEEM gets created - using the average STEEM price over 3 1/2 days (IIRC). Because of the high prices on upbit, it hasn't made sense to do this for years, and the capability was removed from the Steemit wallet because people who didn't understand were accidentally destroying their own value.
  • Under "normal" conditions, 1 SBD can be redeemed for 1 dollar worth of STEEM using the blockchain's conversion function.
  • If the market value of all SBDs (priced at $1) is 10% of the market value of STEEM, that's the "haircut threshold". I wrote a script to calculate it a while ago, or you can get it from SteemWorld. Currently, the STEEM price threshold is $0.261905.
    • This was done to avoid a catastrophic debt cycle
    • The name is because, you "take a haircut" if you convert your STEEM at these times (as opposed to waiting for the $1 peg to be restored).
    • I think the conversion value is the ratio of the current STEEM price (3.5 day median/average) divided by the haircut threshold (currently 0.262). So I believe justyy will get back roughly $0.68 worth of STEEM, or 3.8 STEEM for each SBD that he converted (~9800 total - let's see how it turns out).

Without looking very carefully, my off-hand guess on the 1.2 million STEEM order is that someone's hoping to be able to arbitrage between the market price and the conversion price.

 7 days ago 

If the market value of all SBDs (priced at $1) is 10% of the market value of STEEM, that's the "haircut threshold".

Where does it get the market values from to make this calculation?

Presumably, this means that if the price threshold ($0.261905) is less than the internal market price (0.274 - 0.288), then that's the method to convert to STEEM, rather than the internal market or trading on HTX.

If he only gets 9800 STEEM, he'll be disappointed as he started with 10000. Having said that, his conversion price of 0.3 was much higher than probably should've been accepted.


There are some big trades on the internal market at the moment of people trading between STEEM and SBD.

Where does it get the market values from to make this calculation?

It's just the number of SBDs in circulation, i.e. the current_sbd_supply value times the pegged SBD price ($1). @moecki posted more about this, here, with a helpful background link, here.

Better to have real references than me trying to remember things off the top of my head😉.

If he only gets 9800 STEEM, he'll be disappointed as he started with 10000.

Yeah, mine was just a "back of the envelope" estimate. I don't really know what the median price has been during the past couple days and we don't know what will happen to the price in the next 24 hours before his conversion completes. I don't expect it to be far from 10k, either above or below, though. Not sure if he was expecting to get a $1 conversion rate, but I don't think that's how it works at current prices.

 7 days ago 

It’s all so unnecessarily complicated. Bin off SBD and do everything with STEEM. Simples.

I simply can’t get my head around these explanations.

The original idea wasn't bad. They wanted to have a stable coin so that people could sell products in terms of SBDs and not worry about price fluctuations. Unfortunately, it never worked out that way. As a result, we're saddled with all this complexity that doesn't add anything to the ecosystem.

I think they solved it on Hive, but I think the solution involves the use of misdirected author rewards and the proposal system, which is better than nothing, but it's kludgy and adds even more complexity.

I wouldn't object to eliminating SBDs or doing something to fix the peg, but I doubt if anyone will have the development resources for either of those changes any time soon.

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