The Hive debt is an essential parameter for the Hive ecosystem. The stability of the HBD depends on it. If the Hive debt grows above the debt limit that is set by the code, then the value of HBD will drop. Since the last Hardfork in October 2022, this limit is set to be at 30%. Before, it was set to 10%.
Lets take a look how has the debt performed in the last year market conditions.
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The Hive debt is calculated according to the following formula:
DEBT = HBD in circulation / HIVE Market Cap
More details how exactly is the Hive debt calcuated.
There are nuances when calculating the debt as it is not straight forward. A few things to consider: exclude the HBD in the DHF, take the HIVE virtual supply as a HIVE supply, and the feed price from the blockchain. More details in the post above.
Here we will be looking at:
- HIVE supply
- HIVE market cap
- HBD supply
- Historical debt
- HBD market and on chain price
The period that we will be looking at is 2022.
As already mentioned, when looking at the HIVE supply there is two data points. The regular HIVE supply, that is simply the amount of HIVE tokens in circulation and the second one the virtual HIVE supply that includes the theoretical HIVE that can be converted from the HBD in circulation (excluding the HBD in the DHF).
Here is the chart.
This is the all-time chart for the supply starting from 2016, including the old versions 😊.
The light color on the top is the virtual supply.
We can see that the supply started from just above 200M, and now we are almost at 400M. Nearly doubled in the period of seven years.
We can also notice that in the last years we have a drop in the supply, and it has been in the range around the 380M to 390M for a long time.
When we zoom in 2022 HIVE supply, we have this:
This period represents the recent happenings. At the beginning of 2022 the HIVE supply was 370M, while at the end of August 2022 it is 395M. A 25M more HIVE was added in 2022 from inflation. In terms of percent, the year ended with 6.8%, while the projected inflation was 7%.
We can notice that the virtual supply has expanded. This is mostly because of the decrease in the HIVE price because of the market conditions.
HIVE Market Cap
As mentioned, the debt takes into account the HIVE market cap, including the virtual HIVE supply. When calculating the market cap for the debt we multiply the virtual supply and the feed price for HIVE, not the market price.
Here is the chart for the market cap in 2022:
The HIVE market cap has been decreasing in the period, following the overall crypto market trends.
At the begging of the year, it was around 600M, while at the end of the year around 200M.
A 70% drop in the market cap. This type of contractions in the market cap can push the debt above its limit.
Next for the HBD supply.
Here is the chart for 2022.
Note: This chart doesn’t include the HBD in the DHF that is now a dominant HBD holder with 20M.
At the begging of 2022 there was around 14M HBD. The supply kept decreasing until the end of July when there was less then 8M. Then there was an increase in the HBD price, and the supply expanded. The year ended with around 9M HBD supply.
The reduction in the HBD supply is logical for this type of market conditions. It means the chain is removing debt and can take the weight of it.
When we apply the above, at the end 2022:
DEBT = HBD in circulation / HIVE Market Cap
DEBT = 9M / (495M * 0.3) = 6%
A 6% debt at the end of 2022.
The chart for the historical debt looks like this.
This is the all-time chart with years starting from 2016. We can see that in the past the debt limit was broken on two occasions.
Firs in 2018 and it lasted for a short period of time, and then again in 2019 and it lasted for six months continuing in 2022.
In October 2021 there was another breach of the 10% limit but for just a few days. This happened after a massive expansion of HBD in August 2021 when a lot of HBD was created because of the high HBD price, the supply was at 24M, but it was fast converted back, pushing the HBD supply down and so does the debt.
When we zoom in 2022, we got this:
No debt breaching in 2022!
The year started with a very small debt of just 2% and end at 6%. A steady and slow increase of the debt. While this is an increase in the debt, it is still far bellow the limit of 30%.
As we have seen from the above the market cap has dropped for 70% and the HBD supply for 30%. Because of this we have an increase in the debt from 2% to 6%. The debt is highly corelated with the HIVE price, so it can change fast.
One conclusion that we can get from the above is that HBD holders seems careful with HBD, they know the risk of HBD loosing the peg if the debt is reached and everyone is adjusting their positions reducing the HBD supply in the bear market.
Debt VS Market Cap
Now a few comparison charts against the debt.
First the market cap.
If we plot the debt and the market cap on one chart, we get this.
The overall trend here is the drop in the market cap is inversely corelated with the debt. As the Hive market cap drops, the debt increases.
Debt VS HBD Supply
Here is the chart when we plot the debt against the HBD supply.
The HBD supply has been dropping in 2022, but the debt has increased a bit. Even with the decline in the HBD supply, the debt still increased because of the sharp drop in the HIVE price and the market cap. This shows that there is an inertia in the HBD supply and it can not follows the fast changing crypto prices.
A situation like this can cause a temporarily breach in the debt level and a lag in the HBD supply until it clears up and brings the debt below the limit.
Debt VS HBD Prices
The one thing that everyone around doesn’t want to see is a drop in the HDB price.
But HBD losing its peg is by design and it has happened in the past. The debt is the key parameter when this happens.
Here is the chart.
This is a long term chart for context.
The strong white is the HBD price that the blockchain provides when converting HBD to HIVE.
The grayed out is the HBD price on the external markets and the red is the debt.
We can see that HBD, formerly SBD has never dropped bellow the price levels that the blockchain provides. The gray line has not dipped bellow the white line.
But the blockchain price itself has lost its peg whenever the debt was above 10%. For a short period of time in 2018 and once again in the second half of 2019 when it lasted longer, for more than six months. In this period the debt level was more than 15%. The HBD/SBD price at the time reached 0.6$.
Worth mentioning that since the creation of Hive, March 2022, HBD has not dropped under $1. With the last hardfork in 2022 the debt level has increased to 30%. The ATH for the debt was 18%. If this ever happens again HBD will not lose its value. At the moment the debt is around 5%, far from the 30% limit.
Live data here:
All the best
Posted Using LeoFinance Beta
I prefer to measure the debt against the Potential Supply and not the Virtual Supply. The former is defined as the limit at which the virtual supply can grow before the haircut rule comes into play. You can calculate the potential supply by dividing the hive supply by 0.7 (1 minus the debt limit). The reason for this preference is that the virtual supply variates every time the feed price changes. With a known supply of Hive and HBD you can always estimate what the "actual" debt limit is with the current feed price.
Below you can see the graph of the debt ratio using the potential and not the virtual supply. Please note that the data is adjusted every time there was a hardfork that changed the blockchain rules in question.
Yea thats an iteresting concept .... will push the debt even lower and never alows it to pass the debt limit, what in theory does happen, becouse hbd is devalued ....
The Potential Supply gives you an accurate estimate of how much collateral the blockchain is "willing to use" to back up the value of HBD while the Virtual Supply only tells you how much currently is being accounted for.
i love that hive have a strong solid foundation!
Hive is very good and trusted platform. The way his team has controlled the demand and supply in this peer market, we can safely say that they will control the same in the coming period. As the markets are starting to move up, we are seeing a lot of upside. Thanks for sharing the great detail of demand and supply about hive and HBD.
Thanks for sharing the awesome analysis I really appreciate every part of it.
That's some amazing analysis @dalz, I think dept ratio will come down as soon as Hive is going to pump hard, The best thing is HBD is maintaining it's peg and full filling the Purpose of it's creation. 30% is way too far and we don't have to wait much to get it down to 1% or zero.
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