If you've been transacting in SBD lately, you may have noticed that it's trading at a hefty premium to the dollar:
That's a lot of money for a token that's supposed to have a value equal to $1. What's happening? Well, any pegged cryptocurrency (such as a BTS smartcoin, SBD, or Nubits) needs to have both of these mechanisms:
- When the price of the coin is lower than desired, there needs to be a mechanism to reduce supply.
- When the price of the coin is higher than desired, there needs to be a mechanism to increase supply.
The price of these tokens is determined by a lot of factors, and one of those factors is the balance of supply and demand. If we increase the supply, we push down the price.
In Steem, there's no quick way to increase the supply of SBD to push down the price. SBD is basically only generated when people earn it with author rewards. That's a relatively slow trickle, and it's not able to respond quickly to the kinds of massive pumps that happen frequently on cryptocurrency exchanges.
What can you do about this?
Two things:
- Make sure you're getting your posting rewards as SBD:
If you choose 100% Power Up, you're both missing out on the SBD premium and you're failing to help the system print more SBD to drive the price down to where it should be. - Sell all your SBD! I mean all of it! every penny! Go to the market and buy STEEM with it, or send it to Polo or Openledger and buy something else with it. It needs to be out in the market pushing the price down, not sitting in your wallet gathering the dust of foregone profits.
How do we know the price will come back down to $1 eventually?
Technically, we don't. Technically, demand could outweigh supply for a long time. But here's the reality: SBD will continue to be printed until the price comes down. That's the fact of how this system works. So if it stays pricy for a long time, it will be fighting the fundamentals to do so.
Should I convert to STEEM?
NO, NO, NO, NO. You should sell. You should never convert unless you absolutely know what you're doing; if you do that now, you'll both lose a ton of money and unnecessarily destroy SBD. Let's look at the drop-down box on the wallet screen:
Do the green one. Your wallet and your community will thank you.