Sunday night I initiated a conversion of SBD to Steem through my wallet. I hope to accomplish a couple things with it.
I want to increase the amount of SBD that I own and the value of my SBD. That is, I want to end up with more SBD and I want the total value of those SBD to be worth more USD.
In the long run, I want to strengthen the peg. In the process I hope to take advantage of market actors who are undervaluing SBD. It is intended have an amplifying effect from both reducing supply of and increasing demand for SBD.
I'm starting with a small amount; just 250 SBD. But this is just an experiment, and if it works I will be putting more resources into it and others might be encouraged to do the same.
On the other hand, if I lose money on the conversion it will suggest that perhaps converting SBD to Steem is not a viable option for maintaining the SBD's parity with USD. More data will be needed in any event, so as long as I'm not losing too much money I plan on continuing to experiment with this.
Starting out, I converted 250 SBD.
The Steem Dollar Ticker was showing:
My 250 Steem were worth around $0.82 cents a piece. I could get close to 86 STEEM for them, or trade for BTC valued at about $204.18.
As I'm writing this, about 25 hours later, the ticker is showing:
Basically bad news all around. SBD is worth less vs the USD. Steem is worth less BTC. And the value of BTC has dropped.
If this continues or worsens, There is a risk that I lose money by converting.
I want to take a look a hypothetical scenario in the context of a week long downward trend. That is exactly how the market has behaved over the past week, so we can look at the current figures as reported by steemd.com and the witness @pharesim.
steemd.com is showing a median SBD value of:
base 2.457 SBD quote 1.000 STEEM
base 1.975 SBD quote 1.000 STEEM
Just eyeballing the numbers, we can see that it's going to turn out to break somewhat even. The current feed price is roughly 80% of the median value, and the market is offering us something like 80 cents on the Steem Dollar.
The median price will produce:
250 / 2.457 = 101.750 STEEM
And the market is offering us:
101.75 * 1.975 = $200.956 USD
Essentially the same price for that STEEM as we would get if we sold our SBD now.
In fact, if I were to sell that STEEM on the internal market:
I'd end up with the same amount of SBD I started with. Only I will have taken 250 SBD out of existence, and taken 250 SBD off the market. In theory, the reduction in supply and the increased demand should put pressure on the price to move up. 250 SBD won't have much of an effect, but with more SBD being cycled like this it would almost certainly have that effect.
If the price of STEEM were to stay at about the same level, or even rise somewhat, I would be able to increase the amount of SBD that I have. Potentially by a lot. I will provide an update in a few days showing the price movements and how that would effect conversion payouts.
This is uncharted territory for me. If anyone can help me improve my analysis, please comment below.