I understand there is no speculation in arbitrage, and i was not discussing the 7 day settlement function, i was discussing the internal steem/sbd marketplace.

As to your assertion, yes, arbiters exploiting an arbitrage can absolutely drag the price down artifically. There are many textbook economic examples of this happening. The term for it is arbitrage drag.

It should be obvious that that this drag creates a significant amount of artificial sell pressure on the markets. ANd you don't have to look too hard to see that this artificial pressure almost always wipes out all gains the currency makes.

In a healthy market, the arbitrage would cause the prices to converge somewhere in the middle. But because the internal market is less reactive, the price always goes down to exactly where the internal market started.