SBD is treated as $1 when evaluating the virtual market cap but it's not treated as $1 (in effect) when a conversion happens. The virtual market cap sets the lower limit on the price it treats Steem as when doing such a conversion (hence why it's $0.40 now instead of $0.22 or thereabouts based on raw price feed). That protects us if all the SBD was converted at once, but if SBD gets converted in lots (say, 100,000 SBD every 3.5 days), each time it would substantially increase the supply of Steem relative to SBD, which in turn brings the limit lower and lower. Each successive conversion would be creating more Steem per SBD as a result, while excessive new supply adds pressure to the real price of Steem.
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First I like to assertion if this is what you mean:
Currently the debt ratio is as follows.
12.5 million SBD / 319 million (virtual amount of STEEM) * $0,21 = 18%
The haircut is in effect and therefor ~$0.40 cents is used.
But if SBD is converted to STEEM this debt ratio can change.
Is that what you mean?
@timcliff replied on my other post. I asked him something similar.
The debt ratio gets fixed at 10% but the effective price at which the chain issues Steem per SBD goes lower as more Steem is created. We have seen it go from $0.42 to $0.41 to $0.40, and if conversions happen in large enough amounts we will see that effective price go lower.
Yes, but that makes sense because the debt ratio should come down with more conversions reducing the haircut a little.
@timcliff replied.
Agreed, it does make sense, but it creates the avenue for inflation that is much higher than the community expects.