Correlation does not equal causation. The fall in Steem Price and the rise in Steem Price combined with lags on the moving feed cause the majority of the problem.
Also the Risk / Reward on Steem Dollars is very different. You have the Risk of Steem Failure but only a 10% interest reward. Meanwhile the supply is increasing.
A falling price means an increased reward and implied higher interest rate. If you think Steem Dollars will stabilize over the next year then you can earn 20% + 10% for a 30% rate of return at the risk of Steem Dollars becoming worthless.
Due to the conversion option, the price cannot deviate too far from feed price or people will start converting rather than selling on exchanges.
"The fall in Steem Price and the rise in Steem Price combined with lags on the moving feed cause the majority of the problem. ' @dantheman how is this not caused by price fluctuation on STEEM between domestic market and foreign market? The lags on movement avg. of the feed came from the beta on the underlying asset, STEEM, and because the BSD related pairs have such low volume made it harder for SBD to peg against Dollar on foreign markets, i.e. on poloniex and bittrex. Are we both referring to the implied dollar price or are you referring to something else?
"A falling price means an increased reward and implied higher interest rate. If you think Steem Dollars will stabilize over the next year then you can earn 20% + 10% for a 30% rate of return at the risk of Steem Dollars becoming worthless."
This is true. That's great risk and reward ratio if people invested their money in form of SBD instead of STEEM and power up, however, most supplies are coming from curation and authorization, the cost of those investment are pretty much zero, so from a game theory perspective the present value is pretty high if they sell right now why risk the chance of -100% for +30%.