Steemit Help: Here's Why STEEM is So Expensive Relative to SBD, and What You Can Do About It!
Have you noticed recently how expensive the STEEM currency has become relative to SBD? A few months ago, you could purchase STEEM with SBD at a steep discount against the open market price. But that changed dramatically as STEEM went from a few cents a pop to once-challenging the $3 level.
That the discount lessened as the Steemit bull rally commenced at a clip rate is totally understandable. With more demand and less supply, economic law dictates that the price rises. However, as STEEM is presently correcting, why hasn't the SBD to STEEM ratio adjusted accordingly?
Over the past few days, I've noticed this ratio first approach parity, then hit parity, and then actually go "inverse parity." This simply means that the open market price was cheaper than the SBD price for one STEEM coin. For hardcore cryptocurrency traders and Steemit powerhouses, there's an arbitrage opportunity to be exploited.
At time of writing, SBD only offers a 4% discount against the open market price. This is disconcerting to many Steemit users who came onboard earlier this year. Will this situation ever correct itself? I believe it will, but it may also take some time:
Extreme STEEM Pressure
Steemit claims that one dollar of SBD should always equal around one USD, give or take a small margin. But against the STEEM coin, the fluctuation is incredibly wild, defined by periods of extreme overvaluation, and prolonged periods of undervaluation.
Currently, we're in a period of STEEM being overvalued relative to SBD. That means that a relatively higher amount of SBD is necessary to acquire one STEEM coin, irrespective apparently of the open market value of STEEM.
But because STEEM value was below parity (relative to SBD) between the end of summer last year until roughly a month ago, Steemit dollars may need extensive time to reach an "equilibrium point."
What to Do?
Unfortunately, there's not much you can do as a regular Steemit user. The market is the market and we have zero control on how the mass investing public interprets available data.
That said, the most effective way to beat this setup is to actively look for the dips. Two days ago, the Steemit cryptocurrency was on a steep discount relative to SBD, moving as low as a 1:1 ratio.
As they say, that was music to my ears! I loaded up the boat, and I hope my fellow Steemians did the same. The opportunity was open for only a few minutes, and by the following day, the "parity discount" slipped by about 10%.
One-on-one? Bring It On!
It appears that the days of sub-dollar STEEM is well behind us. My idea is this -- anytime the STEEM cryptocurrency approaches the 1:1 ratio with SBD, jump in. Even if it's a little off the ratio, jump in.
To paraphrase Jordan Belfort, the only regret I have is that I didn't buy more!
Love it. I did not pick up and Steem yesterday due to the fact that I am already heavily invested in Steem and am trying to diversify a bit and picked up some of my favorite ICN at a discount. I am going to keep the 1:1 ratio in mind for the future. I am planning on holding my SBD until they reach a higher asking price on Bittrex and then look for good buys of Steem and other cryptos. I have to remind myself to try and maximize every transaction. A penny saved now could be worth much, much more 2,5, 10 years from now.
I was wondering about this.. so is it better to buy Steem vs. Steem Dollars?
steem
It depends on the circumstance ... a few months ago, Steem dollars (SBD) had higher value so they were preferable. In recent trades, SBD's value tanked, so it was actually more profitable to get STEEM on the open market.
Very informative! Thanks!
You're welcome!
Thank you for sharing your post @bullishmoney. Now it explains a lot!!
Yup! I wanted to share my findings so that others might find value in it :)
Is it wrong I went 50/50 and entered the crypto market? I bought when everything was red and now it's green. Lucky timing I guess but I could always exchange the I bought back to Steem..
I'm not sure if I understand the question? If you went into cryptos at the low, and it's now profitable, that should be a good thing, right? :)
Thank you for this informative post! But what about the fact that they try to loosley peg steem dollars to the USD. The USD is in down trend againdt the basket, DXY.
Yes, I mentioned that they peg SBD to USD in my post. However, USD isn't the most reliable indicator of the SBD:STEEM ratio because a declining USD should increase the USD basis of STEEM. In fact, we're experiencing the opposite dynamic.
Its pegged to DXY chart correlation exists just not in a tick for tick way. So is SBD inverse the world
I don't know about SBD being inverse the world...my main point is the SBD:STEEM ratio, as that's what Steemit users can trade to their benefit. Bringing in the USD to the trade is another layer of complexity that I choose not to address at this juncture.
What you say is good @bullishmoney follow back me.
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