SBD to STEEM a Market vs Conversion Discussion

Just a short 8 days ago, a life-time on STEEM, I wrote an article called The Quickest Way to Go From Steem Dollars to Power Up that gave step-by-step instructions on how to get your Steem Backed Dollars (SBD) into STEEM Power without having to wait the 3.5 Day Conversion period. I also did a follow up article, How Long Does a Market Order Stay Open?, when my order didn't post right away due to me taking screen shots.

At the time, I figured that this was the best and fastest way for me to pump up my STEEM Power with SBD. It is still the fastest, if not the easiest way to do it. Using blocktrade is quick, but it takes more steps and you go outside of STEEMit to complete the trade. If anyone wants to show a way that is quicker and easier than the steps, then make your post and share it in the comments.

But, sometimes, the quickest and easiest might be good for a short-term gain, but might not be the best for the long-term.

@lukestokes posted the article Exchange Transfer Report: 7/9/2017 to 7/15/2017 . In the article Commentary one of his bullet points is:

Keep in mind, if the SBD price stays below $1, it might be a good time to use the convert to Steem option which takes 3.5 days. You'll get $1 worth of Steem for something worth less than $1. On the flip side, if the price of Steem keeps falling, you might be able to buy it cheaper later anyway.

I questioned; why not use the Market to do the trade more quickly?
His response was:

No one says you can't, but the conversion has a couple added benefits:

• You're destroying SBD in the process which lowers the overall debt in existence (SBD is a debt instrument, a STEEM IOU).
• You may end up with more STEEM because the smart contract you are promised is $1 worth of STEEM, even if SBD is trading below that. The market won't give you that same bargain. Of course, the market could shift in any direction, so you're never sure. You could buy today and have it much cheaper in 3.5 days (or much more expensive). By using the 3.5 day average, you're essentially dollar cost averaging your purchase.

Now, @lukestokes has been on STEEMit for over a year, has a reputation of 71 and more STEEM Power than I can imagine getting in my short 1 month being active. So, I really didn't want to challenge him, but I was just getting more clarification to his response. I applaud @lukestokes for being patient with me and providing more comment feedback.

Part of @lukestokes initial reply deals with keeping an eye on the price of STEEM and SBD and determining if the price is going to go up or down in the next 3.5 days. Sure, you have to be able to predict the future and know whether or not it is best to swap now or in 3.5 days, but then I guess that's why you should follow someone like @lukestokes.

The first part is the more interesting part.

Steem Backed Dollars are an IOU for STEEM. They are debt in the system. Unless you are some sort of central bank that manipulates fiat currency, debt is bad for the system. The more IOUs that are out there, the more debt and I assume the lower the value of STEEM.

On another article I found by yet another high reputation been around a lot longer than me STEEMian, @timcliff called SBD Debt Issue - Riding the STEEM Price Roller Coaster , there are some points to consider.

• If the debt level is below 2%, the blockchain will pay users in SP/SBD.
• If the debt level is between 2% and 5%, the blockchain will pay users in a combination of SP/SBD and SP/STEEM.
• If the debt level exceeds 5%, the blockchain will pay users in SP/STEEM.
• If the debt level exceeds 10%, the blockchain will no longer honor the "1 SBD = approximately 1 USD worth of STEEM" agreement. (If this were to be happen, it would be really bad for SBD.)
  Based on this, it is reasonable to suggest that we try to keep the SBD debt below 2%, but with fluctuating STEEM prices, this is very hard to manage!

Woah! So, large amounts of debt (ie SBD IOUs) is very bad and something we don't want to happen?

The hard part of taking the high road and waiting the 3.5 day conversion period is the fluctuations of the price of STEEM, but the fluctuations in STEEM are due to people not waiting to eliminated SBD IOUs and getting their payouts to STEEM before things seem to go up or down.

What as minnows, are we supposed to do?

My goal is to continue to build up my STEEM Power until I reach a point where it really works for me. So, is it better to do the quick trip to the market or wait the 3.5 days?
It would seem, that if I wait the 3.5 days, while it is painful, I am helping out the system in the long run, which helps me in the long run.

Maybe some whales/witnesses will stop by and give their thoughts.

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Let the positive energy sing!

More Power to the Minnows!!