If the HBD market cap is more than 30% of the market cap of HIVE, the debt limit as it is called here, than HBD is no longer valued at $1 from the blockchain when converted to HIVE.
Its a protection against the so called death spiral, that happened to LUNA/UST.
HBD is set to deppeg by design, but not going to zero.
This has already happened on the old chain during the previous bear market when HBD, formerly SBD dropped to $0.6 for a short period of time, and stayed around $0.8 for around four months. It did recover from there though.
You can monitor live the debt limit and the HIVE price that can support the current circulating supply for HBD here: https://hive.ausbit.dev/hbd
At the moment the debt is around 6%, still far from the 30% limit, and the support price for HIVE of $0.06.
But this is crypto and things can change fast.
The HBD concept for a stablecoin is sort of bend but not brake approach. In extreme bad market conditions HBD can drop in value. HBD holders should be aware of this and adjust their position according to their preferences.
Thank you for some really valuable information. I appreciate you taking the time to give a concise answer. I have started adding to HBD and I think of it as a good investment, but I was not aware of the haircut rule. I will start monitoring the debt ratio.
If the HBD market cap is more than 30% of the market cap of HIVE, the debt limit as it is called here, than HBD is no longer valued at $1 from the blockchain when converted to HIVE.
That seems like a dangerous rule. If HBD were to be changed to less $1, I would think that would unhinge and all of Hive value would collapse.
Its a protection against the so called death spiral, that happened to LUNA/UST.
HBD is set to deppeg by design, but not going to zero.
This has already happened on the old chain during the previous bear market when HBD, formerly SBD dropped to $0.6 for a short period of time, and stayed around $0.8 for around four months. It did recover from there though.
You can monitor live the debt limit and the HIVE price that can support the current circulating supply for HBD here:
https://hive.ausbit.dev/hbd
At the moment the debt is around 6%, still far from the 30% limit, and the support price for HIVE of $0.06.
But this is crypto and things can change fast.
The HBD concept for a stablecoin is sort of bend but not brake approach. In extreme bad market conditions HBD can drop in value. HBD holders should be aware of this and adjust their position according to their preferences.
Thank you for some really valuable information. I appreciate you taking the time to give a concise answer. I have started adding to HBD and I think of it as a good investment, but I was not aware of the haircut rule. I will start monitoring the debt ratio.