Dippity Dip!
Bitcoin is now potentially in a downtrend as we approach the halving event which was a complete and fully expected outcome. What's unfortunate is that alts got annihilated while BTC itself shrugged it off no problem. This is to be expected as ETF and otherwise institutional buying pressure keeps BTC afloat while alts retreat back into the safe haven. Par for the course really. Hopefully this is just an easy-mode 20% dip into a bullish summer rather than a bearish summer like we'd normally see after such a good Q1.
Hive hit hard
We've sustained basically a 40% dip from peak, which obviously stings quite a bit when the market cap rank of the token sits at #375. It seems like we should be outperforming and catching back up to our former glory but that hasn't quite been the case yet. These things happen: Hive has a pretty heavy history of lagging behind and then spiking out of control right at the end of the cycle.
The more recent 25% dip in Hive sent the HBD peg spiraling down as low as 92 cents. I never personally saw it that low but I have been told it actually happened and wasn't just a reporting error on centralized aggregate sites that are taking our one Korean listing at face value. Regardless of how low it got it's been a couple days and it's still depegged around a 97 cent discount. There seems to be a little confusion and fear-mongering around this depeg, so I thought I'd address it here.
How is this number even calculated?
I'm told there are a few frontends that display the estimated value of HBD but I've yet to view it with my own eyes. Maybe I'm blind but I don't see it listed on https://hivedex.io/ or https://wallet.hive.blog/market. It seems a bit foolish to not list it front and center but there's also a very good reason why frontends shy away from the number, as it requires API access to centralized exchanges and trust for what Hive is valued on them.
Example calculation: equal and opposite
The napkin version is when Hive/HBD on the internal market is lower than Hive/USDT on exchanges >> this implies that HBD is worth more than $1. However much more commonly HBD is less than $1 which means HIVE/HBD is going to be higher than the HIVE/USDT exchange rate. Take right now for example: Hive is 0.324 on MEXC but 0.338 on the internal market. HBD is trading at a discount to the peg because the internal market shows a higher number for Hive than CEXes.
How much of a discount is that?
Well taking 0.324 / 0.338 gives us 0.959. Which means HBD is trading at a 4% discount to the dollar during this snapshot. On a generic level it looks like this:
(Hive/USDT) / (Hive/HBD) = (HBD/USDT)
It's good to remember here that the first crypto within the pairing is always the value we are measuring, while the second crypto in the pairing is the unit-of-account we are measuring it against. HIVE/BTC is measuring the value of Hive vs Bitcoin... so a very small number 0.00000500 (500 sats) because Hive is worth less than $1 and BTC is worth tens of thousands.
BTC/HIVE would be exactly the opposite of this. Measuring Bitcoin in terms of a Hive unit of account would be something like 192k because Hive is worth about a third of a dollar so the USD value gets multiplied by around x3.
Showing the work on unit math:
(Hive/USDT) / (Hive/HBD) = (1/USDT) / (1/HBD) >> Hive cancels
(1/USDT) / (1/HBD) * HBD/HBD = (HBD/USDT) / (HBD/HBD)
= HBD/USDT (the value of HBD measured against USDT UoA)
So why the depeg?
Well we do fund a stabilizer with hive.fund money that is supposed to absorb a lot of this volatility. I don't have the hard numbers available to prove it but clearly the stabilizer has run out of Hive to dump onto the market. In fact we can see that at least one big market maker (the stabilizer itself?) has created a stepladder of liquidity to catch up to $80k worth of dumping.
This has a couple people on Hive spreading the usual FUD around like "OMG what's to stop it from crashing to zero like UST" or "This is what happens when you give the savings accounts 20% yield". Both of these statements are unequivocally false. I'm surprised I even need to have these conversations anymore but here we are.
Ironically the reason why HBD can't crash to zero like UST is a direct result of the depegging itself. Conversions from HBD >> HIVE that peg the token's downside take 3.5 days worth of blocks before they become liquid and real within the economy. Delays in the collateral conversion process are the sole reason for the current depeg (and any depeg on any stablecoin). UST could be converted into LUNA instantly, which is why it never depegged until it systemically crashed to zero. What doesn't bend: breaks.
Blaming the depeg on 20% APR is also absurd.
But at least the logic of it makes a tiny bit more sense. There are two separate reasons why one might come to such an incorrect conclusion. The first is that 20% APR creates more HBD "out of thin air". False logic dictates this fresh HBD would be dumped on the market and depeg it a bit. The second worry is that 20% APR creates an incentive that chokes liquidity and takes liquid HBD off the market, making it volatile.
Debunking
https://hbdstats.com/
https://hive.ausbit.dev/hbd
First off the on-chain data heavily implies that no extra burden has been placed on the network from the 20% HBD (so far). We have been trading in the 5%-7% debt-ratio range for years (this dump actually pushed it from near 5% to near 7%). That is a healthy and tight band that proves 20% APR is working just fine. I've already written half a dozen posts about why this is the case so I won't explain it much here.
While 20% APR does create this incentive to horde HBD in a timelock, simply getting rid of the APR makes it even worse. Imagine trying to claim that you're going to make HBD more desirable to buy via making the token less valuable. It's childish logic borne through ignorance of how the system actually works.
Too many users start with the assumption that 20% is bad and then try to work backwards from the initial assumption. This is quite literally the definition of "begging the question". We can't derive any real insight from a critical thinking session if we assume we already know the answer from the beginning.
Upon further review it's clear that this false logic is provably wrong. Even if 20% APR on HBD makes it illiquid, that's completely irrelevant. We don't need HBD to be dumped on the market; that would make the depeg even worse. What we need is Hive dumped on that market. That's the core problem.
And who wants to dump Hive after a 25% dip?
Again this false logic pops up with people wondering why nobody is "buying the dip" on an HBD discount. Very few seem to realize that buying the dip on HBD means selling the bottom on Hive. That's how it works: Hive must be sold on the internal market in order to prop the peg back up to $1.
So while I do agree that 20% yields on HBD are wasteful and instead should be allocated to an internal AMM HIVE/HBD pairing to create liquidity... that still doesn't solve the depegging problem... although it could help.
HIVE/HBD AMM EXAMPLE
Let's say a deep HIVE/HBD LP finally exists. Perhaps it has a 0.1% trading fee for LPs and there is some kind of contract that allow HBD to sweeten the deal (meaning HBD from @hive.fund could be plopped into a logarithmic funnel that gets slowly distributed to market makers). Basically this is already how Diesel pools on HE operate (except HIVE and HBD are wrapped and the trading fee is 0.25%). Personally I think we could add a few upgrades but that's another post.
Sooooooo...
For simplicity let's say this AMM has $10M worth of Hive in it and is paired to an equal amount of $10M HBD. To simplify it further Hive is worth $1 at this time and HBD is fully pegged, so 10M Hive paired to 10M HBD. So what happens in this case when Hive immediately flash-crashes 10% on centralized exchanges?
Well that would mean that the 10M Hive in the LP is now only worth $9M USDT. This also means that the HBD is worth $9M because that's how AMM LPs work, both sides are always equivalent. So a 10% drop on centralized exchanges immediately creates a 10% discount on HBD and depegs it to 90 cents immediately without any trading whatsoever on the internal market. Users can still buy HIVE with their HBD at the old price, but the old price is 10% higher than the new price. That's a problem.
However market makers will immediately capitalize on this opportunity via buying cheap Hive from the exchanges and dumping it into HBD knowing they can convert it over the 3.5 day period. The deep liquidity AMM can stabilize Hive by sucking cheap Hive off exchanges using this expectation of 3.5 day conversions. Of course the HBD peg will not get back to $1 immediately because there's a certain level of risk with the conversion process. So even an infinitely deep AMM pool isn't going to completely solve the problem but it can mitigate a lot of the short-term volatility.
So what's the actual solution to depegging?
Well if you want your asset to be pegged to USD then holding a reserve of USD is the easiest way to guarantee the peg. Again, nobody wants to sell Hive after a 25% dip to get a 3% HBD discount. But if one sells USDT into Hive and then Hive into HBD this is a much more viable solution with lower risk.
The problem?
None of we degenerates actually wants to hold USD or derivative stable-coins. Everyone tries to say the 20% yield on HBD is a godlike deal after all our competitors crashed to zero from systemic failure. 20% yield went from "the standard" to "a scam" overnight on the sentiment scale. Nothing has changed since then except for the irrational fear of a bear market that crushed all the unsustainable business models. Here we are two years later and all these fudsters still insist that it's unsustainable. At what point do they capitulate and admit they don't understand it? Probably never.
Potential solution?
There's another "risk-free" scenario that I came up with last month after doing research on perpetual futures markets and the associated funding fee that goes along with it. Of course "risk-free" in this context has nothing to do with counterparty risk and everything to do with price volatility. If the exchange fails you're still boned... so perhaps as DEXes improve these connections become more viable.
In any case it is possible to hold BTC collateral on an exchange while going x1 short to turn the BTC collateral into a stable-coin derivative that farms the funding rate from the long degenerates. A position like this would be earning yield constantly and can then be shuffled off to HBD when the HBD depeg is higher yield than the funding rate. But again this puts us in a position where nobody wants to hold stables during a bull market, so it's not easy to navigate.
Conclusion
Well I think I've rambled long enough. HBD will always depeg given a Hive flash-crash because users are inclined to buy dips, not sell them. A lower value of Hive on exchanges immediately results in a lower value of HBD without any money trading hands on the internal market. It's up to the market makers of HIVE/HBD to shift that liquidity accordingly in response to the external exchange rate.
This is the main counterintuitive point that most seem to not be fully grasping. This will continue to be the case as long as external markets dominate in terms of volume and liquidity. Hopefully these VSC contracts give us a strong pair to both HBD and BTC so we can nullify a lot of this volatility.
Other than that the only way to maintain a cleaner peg is to lower the 3.5 day conversion period to a shorter time. It is possible that a 1 or 2 day average would be perfectly fine, but this never seems to come up whenever we get a depeg. This leads me to believe that everyone complaining about the depeg doesn't understand it; while everyone who understands it doesn't complain. Classic Crypto.
This is my first time seeing HBD de-pegged,but coins depeg and find their way back to the $1 peg. Several other stable coins go to $.99 or $.98 but then they come back up so HBD shouldn't be an exception. Spreading FUD isn't going to help in any way at all.
Huh, I have never seen Hivedex.io before, thanks for that. Decent looking interface that looks like it actually works correctly, lol. Also seems that there is a bit more volume rocking in the internal exchange. Might have to reconsider some trading action once I get my main account up to my next baseline goal.
Yeah I was hoping I'd get at least one person some exposure to the site.
Good stuff.
Wow! i am glad that i saw your comment. The interface is way better and i can actually see a historical chart and volume.
Its amazing that this thing is around for eight years now, out of which four in its curent form and people still cant wrap their head around it .... I have raised a white flag now on trying to explain it ... we just need to increase adoption and liquidity and with that will come better external market prices ...
Yeah we have this history of surviving multiple 60 cent depegs but $0.92 is somehow a sky-is-falling scenario.
Correct, this is how pegging should get better than it is. Doing this gives you an incredible return on USDT or USD of say 5% over a few days or 500% per year. If it takes longer than a few days to get back to $1 you can stake to savings and get 20% while you're waiting which is also very attractive.
The problem is just that we're relatively unknown and our exchange pathways are limited and tenuous.
Still, it's not that bad. Not even 36 hours after your post and it's back to 0.995.
I was hoping we'd see people stop going into freak-out mode on every dip but I guess that's wishful thinking.
I legit don't care what cases it but don't call it a stablecoin when it clearly NEVER holds peg value.
Is that right?
When was the last time HBD depegged and you were annoyed about it?
The APR argument is a misrepresentation.
The 20% APR contributing to the failure to reestablish the peg isn't about the new HBD being created, it's about existing HBD not being used to help in the re-peg. The HBD is locked away in savings because that is what is incentiviced. The 3.5 days conversion becomes irrelevant if the 3 days saving withdrawel (together with the APR itself) creats a real incentive barier to participation in re-pegging efforts.
There are many other reasons why the 20% APR remains a bad idea, but centralication of algoritmic pegging is one of the bigger ones. Looking at the days around the depeg, only two accounts are responsible for more than 96% of the convert operations.
I did a post on this subject yesterday.
The 20% APR didn't cause the depeg, but it contributes significantly to its length. For a part because as you describe centralized pegging is fragile, and the 20% APR desincentifies decentralized re-pegging in a major way.
If we realy want to create a situation where we keep the insane 20% APR while adressing the centralication concerns, saving withdrawel should become dynamic, maybe dynamicly going down based on the level of the downward depeg.If for example between a 2% and 5% depeg, the saving withdrawel drops from 3 days down to zero something like:
if D <= -0.05: Tw = 0.0 elif D <= -0.02 : Tw = 100*(0.05 + D) else: Tw = 3.0Something similar could be considered for the conversion time, but that is a much more tricky one that could incentify manipulation.
The important thing though is that this would be another hack to make up for the fact that the 20% APR incentifies $HBD away from comunity participation in re-pegging. Centralized re-pegging is fragile. Decentralized pegging has halved since the APR went up to 20%, and it was already low at that point.
No Dude
This is all nonsense.
20% APR was never "insane" until UST collapsed.
Before then it was the STANDARD.
Nobody said it was "insane".
Second of all these depegs have not lasted longer than 3.5 days, so you're provably wrong about needing better conversions. The depegs happen before conversions are available as a direct result of flash crashing wiping out all liquidity on the market. There's been plenty of opportunity over the last week to get out at the $1 mark and anyone can simply do a conversions themselves if they want.
You people really think you can jump in here and talk about this as if depegs happen all the time. Well, they don't. And when they do it's like a penny so not even worth addressing. You guys never have any data to back up your claims. Ever. Like show me the data that proves HBD repegs easier before 20% APR. Doesn't exist because it's not real. Re-pegging is actually much better now than it was before high APR. I've been here since 2017 I know what I'm talking about.
Seriously did you even notice that HBD was $1 when you wrote this?
It's $1 right now what are you even talking about?
How much time do you think has passed exactly?
Hive is worth 32.4 cents on the internal market and 32.4 cents on the external market.
Uhm, maybe you didn't notice the link, but I'm the one working from the data instead of looking for data to fit a narative.
I look at the on-chain data and listen what it tells me, construct a narative from that that makes sense. And what it tells me is that community participation in re-pegging has gone down significantly. The lower the APR the higher the incentive for HBD holders to make money from participating in algoritmic pegging compared to locking their holding in saving, the more centralized the chian becomes and the more vulnerable to (as you observed) the centralized stabilizer running out of pegging strength.
While the stabilizer excerts a constant upward pressure, the reacivity of the stabilizer in convert operation has been relatively low. If you had looked at the actual data, you would have spottet that in terms of actual reacivity, @mika has likely done more in reestablishing the peg than @hbdstabilizer has. That is one account. Imagine the reacivity if the rest of the community had the incentive to participate.
As for time, what would you say? 3.5 days? nah.
Depegs seem to be getting longer and we should find ways to decentralize re-pegging. The most logical way is to either take away the incentive to put large amounts of HBD in saving, or to auto drop saving withdrawel time to zero days in case of a depeg.
But the important part isn't that we disagree, as we obviously do, the important part is that you were misrepresenting the HBD pegging related arguments about the 20% APR. The (main) argument isn't about extra $HBD creating downward pressure, it's about locked-in-savings $HBD being unavailable for algoritmic re-pegging, and working as an anti-incentive to community participation.
A screenshot from Coingecko?
Seriously man I don't have time for this nonsense.
If you don't even know how Coingecko aggregation works... wow.
Let me give you a little hint.
HBD has ZERO listings.
Not only is this market inaccessible to the entire world but it also has zero liquidity and a 2% spread.
This is not a "matter of opinion".
This is fact.
You're trying to show Hive depegged over 2% during times it is fully 100% pegged.
You don't know what you're doing.
Again I don't have time for this ignorance.
Figure it out.
Sure, stay in your buble and don't look at the actual on chain data that shows the actual problem because it doesn't fit the perpetual motion machine free lunch narative. There is no sense in trying to explain things to someone who has already made up their mind before having looked at the actual data.
But again, that doesn't even matter because my comment wasn't even about that, its OK if you disagree with the arguments or even if you dismiss the data that shows their validity.
My comment was about you misrepresenting the pegging argument against 20% APR, a subject that you keep ignoring.
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It’s shown on your PeakD wallet page. For me, I can see it on my iPad, but not on my phone.
Unfortunately the spread alone between buyers and sellers is higher than 1% on the internal market right now.
The number displayed on peakd doesn't look particularly accurate, although I did forget this existed.
It's much more appropriate to calculate and show such a number directly on the exchange page.
I just can't get myself to freak out over this stuff anymore!
First of all, if you're involved in crypto — period — you surely understand that "weird stuff" is going to happen. If people expect absolute certainty, maybe they should be investing in T-bills, not crypto.
I appreciate the explanation of the mechanics, though!
=^..^=
20% is life.
I have been growing my HBD bag as I had a feeling for some mystic reason the market was going to crash, not really I just though it was already too high and had to crash at some point, I think the "war" was the excuse, I cant say how bad or good HBD is at the moment since I dont have your knowledge on the subject but I cant see the scam in it neither since its not a fixed value, in a few months market skyrocket and witness decides to lower it dont see why ppl think its a scam, I really looking forward to the VSC project to bring the many advantages to Hive probably one of the best projects developing on Hive and many ppl dont know or even care about it, I guess they dont do that much marketing neither
I recently wrote about this. The backing mechanism is not going to force the market to reflect the peg value of HBD. CEX markets have normally given HBD less than its full 1 USD value. With HBD on a CEX, in order to convert to Hive, you have to pay a withdrawal fee, sell it on the internal market for Hive (at the loss of the spread), then buy HBD on the internal market (at the loss of this other spread) and then upload the new HBD to the CEX. If these costs wouldn't add up to more than 3%, I'd be considering withdrawing from savings right now. The availability to sell or buy HBD on CEXes is extremely limited. Many of the CExes don't even list HBD.
Hive needs more promotion on social media, created a hive promotion song with AI, would be grateful if you could like and share it, thx :)
some painful lyrics, but a pretty decent effort for an AI
yeah, AI is really wild, but not perfect yet.
Great explanation
@tipu curate
Upvoted 👌 (Mana: 45/75) Liquid rewards.
Well, I have to say it, some people need to read this post before start to talk about HBD.
FOR ALL THE FUDSTERS IN THE BACK!