Earlier this morning, I decided to purchase some SBD at a price of $1.02. I thought it would be worth creating a short post on here explaining why I did that, and to hear what your thoughts are about it.
If you're familiar with SBDs, you'll know that 1 SBD is backed by $1 worth of Steem. This means that in theory, the price of 1 SBD will never/very rarely go below $1 for long, otherwise people would simply profit from the arbitrage opportunities.
So at a price of $1.02, there's a potential downside of <2% if the price falls to $1.
However, the SBD price has risen significantly higher in the past. According to CoinMarketCap, it reached a high of more than $13 back in December.
Of course, there is no guarantee that the price of SBD will ever reach those highs again. But the fact that it has occurred in the past, means that it can possibly happen again in the future too.
In which case, there seems to be a very good risk/reward ratio here. Again, in theory, the potential downside is less than 2%, but the potential upside is more than 1000% compared to the ATH price. Even if the price of SBD never reaches such heights again, it seems like a sensible place to park some my money while the price of other cryptocurrencies keep falling.
So that's my rationale. I'd love to hear your thoughts and whether you're doing anything similar.
Have a great day!
SBD is supposed to be a permanent peg on 1$ but the free market decided to let it be free and go on a wild ride around the moon and across the stars, in the long term of the platform, it's better of it stays @ 1$ or as close as possible, but good luck, you have basically made a pretty hard to lose bet, you either win or stay the same.
Precisely!
I have been really considering to do the same recently. And I eventually may. However, everyone expects SBD to stay above or at $1.00 threshold. The same way it went well above $1.00 it can go below. At the end I believe it will dance around $1.00 from now on. I don’t think it will go much higher anymore, SBD will do what it supposed to do, 1 for 1. As an investment, it’s a great hedge. I think you did the right decision.
Putting FIAT money in SBD might not be the worst idea thanks to the peg. Your goal is to just park it there until the market recovers and then sell it off again, right? In that case I would closely watch how the SBD price reacts when other coins go up again. If the SBD lingers at the peg then I would sell it because that could indicated a faded interest for SBD. If the price follows Steem closely then you could probably even leave it there until you put it in whatever coin you want to invest in.
But generally I would look into Steem Power and how much return of investment that actually gives you. It is massivly versatile and the low price now a great opportunity.
I was thinking of doing the same but I wouldn't have been able to articulate the reasoning as well as you have done here!
Thanks for sharing your thoughts Louis, insightful as ever. In fact, I owe it to you that I'm on here, having discovered Steemit through your YouTube videos. Keep up the good work.
Good call @louisthomas ! So Off Topic here, I showcased you in my most recent episode "5 cryptocurrency channels," today. Please stop by and check it out :)
Since SBD is peg at $1 price I still believe that if the bearish market continues that SBD will fall below that peg price. But not too much but steem will fall more which will bridge the gap between SBD and steem to become close or maybe SBD will be higher than steem in the short run . Your investment decision is wise @louisthomas
A sound decision that you have made. I am also keeping my SBD with me and not purchasing any Steem with it at the moment. If this bear run continues Steem can fall below $1 but SBD will have its advantage for the peg (at least lower threshold)
I didn't know this! Wow!
I've been here for 6 months already and I hadn't even heard about SBD being backed by a minimum price of Steem. That explains a lot. It has been dancing around $0.99 and $1 all night and morning.
But if what you said is true, then it's very reasonable to park your money in SBD :P It can only stay here and, if we are to trust the past and the back up, it can only go up or stay put.
How would one exchange SBD for this back up if the price were to go under $1 anyway? Where does one "cash in" their SBD against Steem?
And I think this is far from a risk given the circumstances. I should actually do the same with my measly $100 in cryptocurrencies before they keep falling into nothingness.
Great thought process. I guess the SBD could act like a stablecaoin within the #STEEM ecosystem. I myself have been holding plenty of SBD on the way down and have thought of transferring to SP if parity is achieved but your logic also makes sense here. Thanks!
SBD was always supposed to be a stable coin, it just went on a wild ride.
Well I was lucky enough to get to see that hike in the past ;)
Liked that price hike very much I should say !
While will get some soon , who knows we could get to see anything happen in near future !
You are right on this, let assumed the the price of sbd increased though a lot of people said it will surely stay at 1sbd but nothing is actually impossible as it could reach $10 or even more in the nearest future, but let say as you have assumed that it never reach again, it wont be getting more dip compare to other cryto currency as you have explained. I always like your view when it comes to investment capabilities.
I actually did the same thing.
I bought 100+SBD few hours ago, but the problem is I won't get it because my bank doesn't make money transfers over the weekend.
$1.02 is insanely low.
After seeing your post, I'll definitely buy some more and transfer Steem I have in wallet into SBD.
I totally agree with you that now is the time to buy because Steem Dollar was worth so much back then now its only down because of a panic otherwise people are earning on the platform no matter what happens in the market and I believe that this is the perfect time to load up on steem dollars
I understand that risk reward ratio evaluation is very essential criteria in any kind of investment. It helps us to believe in the decisions we make and stand by them if things go south. The whole crypto-market, for the past few months, has been providing good R-R ratio set-ups. But it very much depends on the individual's perpective. Perpective in terms of short term or long term and holding capacity. The good thing to do right now would be to ladder the buys periodically to average the price. Your rationale seems good considering the two major facts, firstly, the set up being great and secondly, the steemit platform has lately attracted many new members and so it will surely see growth in the future. Happy investment.@louisthomas
You acted wisely dear friend.
This is the best time for the buyers or investors, but a very bad time for the sellers.
If you are not in hurry to sell any time soon, be sure that you will make your money with a very big profit.
When I'm done with my project, I will consider buying some and keep it too... Lol
I think it's the best decision to buy some SBD because the price of SBD is very low this time.
And I think it will go up again and we should do the same.
I'm planning on buying some SBD too.
Thanks for the heads up.
Smart move i did the same
@louisthomas, well explained logic, but what is that arbitrage that should maintain SBD above $1? Could you please shed some light on that?
All prices are in a very low state
Really something broken by me
I hope prices will rise as soon as possible
Indeed..
Great idea ...
I appreciating your thought . I also buy some sbd in future...
I know it is risk but hopefully SBD price increasing very soon.. @louisthomas
Yeah it s right..it s the best moment to buy SBD..Thanks for the advice.
i think it is best decision and at the same time with almost no risk in this investment
i am also looking forward to buy some
But there's one thing. For the people who trade currencies, they should know what they are trading and what that coin/token does. They shouldn't be trading SBD at $13 when if they did their research they should know that SBD is paired to $1. I would not trade it past much more than a dollar.
I agree with you that it's a good time to buy Steem.
That was a smart move @louisthomas
I don't think SBD will ever be a good peg. It just need a better regulationing system such as Bitusd. Tether only works bc you think it backed by $1. For some reason I think tether has enough money to back 90% of its token-just my gut feeling. I been trying to buy more crypto but exchanges banning credit/debit cards has blocked alot of my crypto buying
That actually makes a hell of a lot of sense.
You bought a bad 1.2 $ SBD that has been reduced, I hope it goes up a bit more.
steem has a total supply cap.
Does Steem Dollar have a supply cap?
How is each Steem Dollar generated or pegged?
Seems like a smart call in the grand scheme of things.
How many SBD did you buy?
Agreed, buying SBD too.