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RE: The accumulate, pump, and convert strategy to show that the proposed two-way SBD peg can be abused
Do you have a feeling for how easy it is to move the steem price? Probably should look at the available avenues.
I have a feeling also that if they place a large enough fee, this quickly becomes harder. They don't even need the fee to be that large to get people to use the reverse conversion either. Maybe the fee can be halfway between what you would make from arbitrage by naively converting and selling.
Analyzing the markets would be very important to anyone who wants to execute the ACP strategy, and I don't want any mistakes I might make in estimating numbers to distract anyone from the main point I want to convey which is that the two-way SBD peg has a very real potential to be abused. With that being said, I'll try for a super quick rough estimate about how much someone would need to spend to pump the STEEM price 100%, a 2x pump. I took a look at the open orders on binance and it would take around $100,000 in total to increase the price of STEEM by 10% on binance.com in all of the STEEM/BTC, STEEM/ETH, and STEEM/BNB exchanges. I didn't look at the other exchanges, but binance has about 4% of the total volume so a very rough guess is it may take $2.5 million in total to increase the price of STEEM by 10% across all markets. Also based on open sell orders on binance, it looks like the next 10% increase would take less than $2.5 million, and the next 10% increase would be even less than that which suggests it may be possible to get a 2x pump for maybe $15 million to $25 million; however, there are probably a lot of people who don't have open sell orders who would still want to sell STEEM at some point during a 2x pump so perhaps a better estimate is it might take around $50 million to get a 2x pump of STEEM. If it took $50 million to pump STEEM 2x and the average price you paid during the pump was 1.5x then the profit on the phase 2 STEEM would be around 33% of the $50 million or around $17 million. If you accumulated $50 million STEEM in phase 1, then the profit on your phase 1 STEEM would be $50 million, and so your total phase 1 and 2 profit would be around $67 million. It is difficult to imagine a scenario where you would lose more than that in phase 3. For example, even if it took some ridiculously large amount like $100 million to keep the price of STEEM pumped up at the 2x price for 3.5 days and even if STEEM instantly dropped to some ridiculously low amount like $0.01 at the end of phase 3, they you still would only lose $50 million on the STEEM you purchased in phase 3 so your total profit would be still be $17 million even with the ridiculous phase 3 numbers used. However, the key point to make is that the profit can be increased simply by adding to the amount of STEEM you accumulate in phase 1 because if you had accumulated $150 million worth of STEEM in phase 1 instead of $50 million, then your profit would have been $117 million instead of $17 million. I'm not sure how a fee would stop this abuse from happening because even if you imposed a 10% fee on STEEM to SBD conversions the profit from abusing the system would have still been $12 million instead of $17 million (or $102 million instead of $117 million).
Thanks for the current analysis.
The fee would only help if the SBD price was higher than 1 USD maybe. And maybe they would turn this mechanism off once 1 SBD is near 1 USD?
By the way, do you see this as something that can be done repeatedly?
Yes, I can definitely see it being done repeatedly especially after powerdowns remove the scarcity of liquid STEEM and bring the price back down to a non pumped up level. The cycle concept you've mentioned in some other posts could possibly be used to create an artificially low pumped-down price to maximize the amount of STEEM you can accumulate in the next phase 1 when converting the massive amounts of SBD you got from your previous phase 3 into STEEM. Every time you repeat the APC strategy could be more profitable than the last time because each time you could use your profits to accumulate even more STEEM in phase 1.