Steem Dollars Are Not $1, And We Can Thank The Bots
After weeks of trying to identify why Steem Dollars (SBD) diverged from their $1 USD course, I am going to go out on a limb and assert that it was much in part to do with the rise of bots on Steemit.
By design and intent, SBD was intended to be pegged to the US Dollar, having only their conversion value to Steem as a means of backed intrinsic value. Yet as the rise of bid bots have surged in recent weeks, SBD has become a rejuvenated internal currency within Steemit armed with increasing utility.
SBD currently serves as the base currency for the bid bots. Until recently, bidders were largely required to utilize SBD to bid on upvotes. STEEM bids are slowly enterring as an alternative payment form, however, but even now SBD payments remain the norm. Those curious about the prevalence of bots need only to look here:
https://steembottracker.com
By finding an alternative functionality, this has helped to extend the lifecycle of SBD from being immediately sold for STEEM. If SBD was largely considered as being akin to US Treasury note, imagine if the bid bot was a payday loan service that paid you the double digit interest return in exchange for your US Treasury notes as a fee. This is essentially what was taking place as upvotes often saw double-digit return on investment returns and payments on posts were advanced up to the 6th day.
Eventually equilibrium between supply and demand would be met, and this has now occurred. Limited steem power delegation to the bots and an abundance of new SBD (from higher payouts due to a rising Steem price, which is in part due to a higher SBD price due to higher income rewards) has resulted in most bid bots returning a negative ROI. Demand for bidding services has exceeded the supply of it.
Where we go from here is unclear. But if I had to guess, what is most likely to occur is an inflation of SBD supply which could return the SBD value back down to its $1 peg in due time. This can be offset however. An increase in steem power delegation to the bid bots could keep the cycle going for a bit longer. Doing so could help to increase the price of Steem by locking up more supply and taking it out of circulation (provided that this is new steem being locked into steem power exclusively for this passive income).
Whether you believe that a broken SBD peg is good or bad for the ecosystem as a whole, I would imagine few would doubt that it has positively influenced the current price of Steem. I would argue that increasing bid bot delegation can help make Steem more valuable in the long run. But what is for sure is that as long as bid bots continue to exhibit maxed-out votes or negative ROI on bids, those who delegate are likely the greatest recipients of the wealth transfer.
