In the early days of HIVE, the stability of the HBD Stablecoin faced significant challenges due to its inherent volatility. Recognizing the need for improvement, the HIVE community embarked on a journey to enhance the stability of HBD, employing strategic measures that have shown promising results.
Interest Rate Hiking Cycle
One pivotal idea to bolster the stability of HBD was to implement a cycle of interest rate hikes on staked HBD. The rationale behind this approach was to attract more funds, increase liquidity, and facilitate smoother arbitrage processes. The interest rate hiking cycle began on February 28th, 2021, with subsequent increases on the following dates:
- 28.02.21: 3%
- 02.06.21: 7%
- 18.07.21: 10%
- 18.12.21: 12%
- 10.04.22: 20%
Hardfork 25: Increasing Stability through Conversions
A significant milestone in the pursuit of stability was achieved with Hardfork 25 on June 30th, 2021. This update enabled HIVE to HBD conversions, complementing the existing HBD to HIVE conversions. This dual conversion mechanism serves to protect HBD from both upward and downward market movements. Additionally, the implementation of the hbdstabilizer further contributes by providing liquidity from the DHF to the internal market.
The Impact on Stability
Since the introduction of HIVE to HBD conversions and the interest rate increase to 12%, the stability of HBD has experienced substantial improvement. This is evident in the statistical analysis of three distinct time periods:
- Dataset 1: Distribution from 25.03.2020 until 31.12.2021
- Dataset 2: Distribution over the whole dataset from 25.03.2020 until 10.01.2024
- Dataset 3: Distribution from 01.01.2022 until 10.01.2024
The increased stability becomes obvious when comparing the price distribution between dataset 1 and dataset 3. Dataset 2 describes the whole period of available data and only serves as a baseline. The volatility shrunk from 0.18 down to 0.02. The maximum range of price movements shrunk from 1,9 down to 0,27.
Statistical Properties:
| Dataset 1 | Dataset 2 | Dataset 3 | |
|---|---|---|---|
| Mean | 1.024004 | 1.015954 | 0.989456 |
| Standard Deviation | 0.183968 | 0.157900 | 0.021655 |
| Minimum | 0.562777 | 0.562777 | 0.897044 |
| Maximum | 2.496791 | 2.496791 | 1.173890 |
| Median | 0.982736 | 0.986949 | 0.989245 |
These statistics reveal a trend towards increased stability, as demonstrated by a lower standard deviation around the mean price. While there is still progress to be made, the tools in place, including HIVE to HBD conversions and interest rate adjustments, have proven effective in mitigating volatility. The data suggests that a larger supply on the market could further contribute to stabilizing HBD's price.
Market price data: coingecko
Period analyzed: 25.03.20 – 10.01.2024