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SBD is now trading at around $0.8 on major exchanges. However, SBD is, by definition, worth $1 of Steem, then is it a good investment to buy into SBD now?
Well, of course, this is not an easy question. Let’s for now neglect the fact that SBD had been sitting well above $1 for quite a long time since that is another mystery not fully decoded. But even given the statement that SBD should be ideally $1, seems to justify that buying into SBD, which is only $0.8, can bring a guaranteed profit of 20%! So, is it?
As I recall, the historical lowest price for SBD is $0.7x. So despite SBD’s pegging has not being working well, but at least it can hold above a reasonable price.
Let’s look into SBD’s definition more closely. Actually, SBD does not mean $1 worth of Steem exactly. SBD’s exact definition is that 1 SBD can be converted into $1 equivalent of Steem after 3.5 days at the average feed price of Steem for the past 3.5 days.
The time factor here is designed for a certain reason that I won’t get into details here. But obviously it is the factor behind the loose under-pegging. It’s easy to prove this point - suppose there is no time delay, then SBD can be converted into $1 of Steem at current price, then arbitrage will guarantee that SBD is closely pegged to $1. Q.E.D.
[Update: please refer to the comments where @smooth indicates something might be wrong with my arguments. I will look into it later.]
My explanation goes as follows: when Steem price is at a descending trend, then SBD price will anticipate it and hence goes lower than $1. When the Steem price stabilizes, SBD price should restore its value back to $1. Of course, with a lower Steem price, SBD might be slightly lower than $1 to reflect the risk of the death of the Steem blockchain.
So, my conclusion is yes. Yes, SBD at the moment is a very good investment for a low risk guaranteed profit around 20%, but you might need to wait until both Steem and the general crypto market to stabilize though.
What do you think!?
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