HBD Created an Existential Crisis for HIVE

HBD Created an Existential Crisis for HIVE

The desire to create a relevant stablecoin created an existential threat to HIVE.

HBD stands for Hive Backed Dollars. The value of HBD is derived from HIVE. HIVE includes operations to convert HBD to a dollar equivalent of HIVE. There is also a reconvert button to convert HIVE to HBD.

Since the value of HBD is derived from HIVE it is rightfully called a derivatives. There is a long history of financial history of financial firms destroyed by derivatives.

I like this basic structure. HBD had low interest and the system was designed to give HBD a haircut if the market cap of HBD exceeded 10% of HIVE.

Anyway, a few years back, HIVE whales decided that they wanted to turn HBD into a world class stable coin. For some reason that I never could understand, they started to pay 20% interest on HBD savings and raised the HBD threshold to 30%. They lowered the HBD interest to 15% ... which is still absurd.

I remember that the HBD market cap rose to well over $14 million.

HBD never became a leading stablecoin. Who would trust a stablecoin derived from a potentially unstable base?

HIVE's current plight provides insight into the dangers of stable coins.

Ausbit Bank shows that the HBD market capitalization $11,183,518 and the HIVE Marketcap is $85,634,553. The HBD marcap is 13.06% of the HIVE marcap.

HIVE is trading at a dime. Were HBD holders to convert just 1 million HBD to HIVE, they would flood the market with 10 million HIVE.

A mass conversion of HBD to HIVE would push down the price of HIVE inspiring more HBD holders to convert in a process called a "death spiral."

I really don't know how HIVE will handle its HBD crisis.

While I like the basic design of HBD, the decision to pay 20% interest on HBD was one of the worst decisions that I have seen in this section of the crypto world.

Regardless it is interesting to keep track of HBD on ausbit bank.

The HBD Marketcap is currently 13% the HIVE Markcap. It must stay above $0.0444. to avoid the haircut. HIVE dipped below a dime. A major market disruption cut send HBD to the hairstylist. It is interesting to watch. I wonder how HIVE will survive its self imposed crisis.

The Image

I generated an image of a bee staring at a death spiral on night cafe