The @hbdstabilizer started operating in February 2021. In the first months it had quite a low budget and towards the end of 2021 it started to gain some weight. We can say that 2022 was the first year in which the stabilizer was operating in full force and with a decent amount of funds, that have been constantly growing throughout the year. The bot is runed and operated by @smooth.
For those who are not familiar with the project, the job of the @hbdstabilizer is to keep the HBD peg around the one dollar, by trading HIVE and HBD on the internal market. It is a bot that provides liquidity for HBD around the dollar. It does this with funds that is receiving from the Decentralized Hive Fund DHF.
The latest proposal for the @hbdstabilizer is asking for a 240k HBD per day, or 10k HBD per hour. At the moment the daily budget of the DHF is around 200k, so it is still not paying the maximum that is set by the stabilizer, but as funds grow in the DHF at some point it will happen.
We have two scenarios/modes of the stabilizer operation.
- Buying HBD
- Selling HBD
HBD is paired on the internal market with HIVE so the trading is in the two native Hive currencies.
When HBD is below the peg then the stabilizer is buying HBD to bring the HBD value to $1. Bocuse, it receives HBD from the DHF, first it converts the HBD to HIVE, and then uses HIVE on the internal market to buy HBD. Buying HBD means selling HIVE.
If the price of HBD is above the dollar then the stabilizer is selling HBD to bring it back to $1. The stabilizer receives HBD from the, sells it on the internal market for HIVE and sends back the HIVE to the DHF, where it is being instantly converted to HBD so it can be used from the DHF.
From the description above we can conclude that the @hbdstabulizer is receiving funds in HBD only, but it is returning funds in HBD and HIVE. To be able to compare the received vs returned funds we will need to convert the HIVE sent to the DHF in HBD.
HBD Sold VS Bought
Let’s take a look at the market activities and how much selling and buying the stabilizers has been doing.
Positive bar means the stabilizer is selling HBD, negative bar means it is buying HBD.
As we can see from the chart the stabilizer has been mostly buying HBD throughout the year. This is because the HBD supply was mostly contracting in 2022, as it went from 14M to 9M. The stabilizer was the major player in this as it was providing liquidity on the internal market and has expanded the HIVE supply, but contracted the HBD supply.
January 2022 has been the month when the stabilizer bought the most HBD from the internal market, a total of 1.6M HBD. October has been neutral for the stabilizer, as it has bought and sold the same amount of HBD. We can see that there was some more buying in November, when the market dipped, and HBD followed the trend, and it need some help from the stabilizer. December has been also close to neutral.
The cumulative data for the amount of HBD bought from the stabilizer looks like this.
A total of 12M HBD was bought from the stabilizer, out of which 7.7M net HBD was bought and removed from circulation in 2022.
The above are the results from the market activity, and the amount of HBD that was added/removed from circulation. Now lets take a look how does this market activity resulted in terms of profit/loss for the DHF.
HBD Received From The DHF
As already mentioned the DHF is paying funds only in HBD. Here is the chart for the HBD transferred to the stabilizer in 2022.
The year started with the budget from the previous year and the old proposal of around 80k HBD. Then April the new proposal started where the stabilizer is asking for 240k HBD per day.
We can see that since then the amount of HBD received per day has increased at the pace at the increase in funds in the DHF. At the end of the year there is around 190k HBD per day.
HBD Sent To The DHF
As mentioned above the stabilizer is sending funds to the DHF in for of HIVE and HBD. The HIVE is converted to HBD. Here is the chart.
Note that funds sent to the @hive.fund are in form of HIVE and HBD. I have converted the HIVE rewards to HBD, for easy representation and comparison.
We can see that most of the funds that the stabilizer sends back to the DHF are in form of HIVE and then those are instantly converted back to HBD in the DHF. This is understandable as the stabilizer was mostly buying HBD in 2022 and it needs HIVE to do that. When it doesn’t need the funds it sends them back. We can say that these are mostly excess funds that the stabilizer has them if it needs to provide a liquidity for HBD at some point.
HBD Received VS Sent
If we plot the amount of HBD received VS sent to the @hive.fund from the @hbdstabilizers on a monthly basis we get this.
A positive bar means that the stabilizer has sent more funds to the DHF then received, a net profit, while a negative bar means that the stabilizer has received more funds then sent back, or a net loss.
What’s interesting from the chart above is that when HBD loses it peg on the market, even on the downside, usually then it is when the stabilizer makes profit. We can see this from November, that is the record high month in profit for the stabilizer. That is the month when the price of HBD on the external markets dropped to 0.95. The stabilizer is basically making arbitrage on the HBD price, buying it at 0.95, while making conversions for $1. Interesting December has been the month with the worst performance for the stabilizer, while the HBD price didn’t had that much of a price action in that months. It can be a result from bad HIVE prices and conversions.
When we add the above the cumulative HBD added in the DHF from the @hbdstabilizer looks like this.
A total of 1.8M HBD profit for the DHF from the @hbdstabilizer. At one point in 2022 this amount was 2.1M.
This amount is continuation from the previous year, while for 2022 only the stabilizer had added 0.6M HBD in the DHF.
The hbdstabilizer profitability is a combination of the buying and selling, it is making on the internal market, and the conversions from HBD to HIVE.
As mentioned above the @hbdstabilizer is constantly making HBD to HIVE conversions in order to have HIVE and buy HBD if needed. The thing is these conversions take 3.5 days and have a market risk in them, and sometimes they can be market positive, while other times negative. Because the stabilizer is making a relatively big amounts in conversions, those can add up.
HBD Price On The External Markets
At the end the chart for the HBD price in the period.
We can see that the HBD price on the external markets in 2022 was quite stable with a few short lived exception, when it broke the peg on the downside, but also on the upside. This might seems like a big deal for some, but if one looks at the HBD price in the previous years, we can see a big improvement. 2022 was the year in which the HBD price performed the best.
There was four occasions when the HBD price broke the peg significantly on the downside, in January, June, August and November. On each of these occasions the price bounced back to the peg in one day, except maybe for November when it needed a few days to fully come back to the peg.
Note that these are external market prices, while the internal on chain price has been at the peg, and users can convert HBD to HIVE for one dollar at any time.
On the upside HBD broke the peg once significantly at the end of July, when it reached a 1.2$ for a day, and then once again in October. Both of these were very short lived.
The main takeaway from the above is that the @hbdstabilizer has removed a 7.7M HBD from circulation in 2022, and made a 0.6M HBD profit while doing this. It has helped immensely to stabilize the HBD price and has made a profit for the DHF while doing that.
The end result is the best year for HBD in terms of price stability, with the price of the token trading closely to the dollar and only dipping to 0.95 on a few days in 2022. On the upside each increase was also very short lived.
The internal market has the most liquidity then ever, and HBD now has the most liquidity there, thanks to the stabilizer.
In 2023 the stabilizer is entering with even more funds, meaning it can keep the HBD peg in even tighter range to the dollar, although you can never know with crypto markets 😊.
All the best
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One additional thing to take into consideration are the results of all the conversions. @smooth mentioned the HIVE to HBD conversions, and their associated 5% burn. In addition to this, I think the HBD to HIVE conversions also have to be taken into account in terms of how much is going in and coming out of the conversion, since if you convert 0.95 HBD to $1 worth of HIVE, then in essence the HIVE supply has increased, hasn't it? So we have to factor in any additionally created HIVE.
However, even if there is dilution of HIVE, this may be totally fine since in this special case all the newly-created HIVE would go to the DHF. But it's still important to account for all the conversions (amounts going in and going out) so we know exactly what is happening and what the outcomes are of the economic operations.
All the conversions are accounted.
No. Each HBD represents $1 worth of HIVE regardless of its trading price. These conversions don't increase supply.
Another source of profit "to the blockchain" or Hive ecosystem (but not directly to DHF) is the 5% fees on conversions from HIVE to HBD. That's not necessarily attributable to the stabilizer even if the stabilizer is the one doing the conversions, because others might do them anyway, but it is a part of how fluctuations in the HBD peg pull value back to Hive over and above the utility of HBD to the platform.
Do you think that 5% can help aid the 20% HBD Apr on savings? I feel like it is too much for the ecosystem to offer that lucrative returns, that's why it needs more funding.
The stabilizer, not even accounting for the 5% conversion fee, has generated a profit for Hive of almost $2 million while I doubt we have even paid $1 million in interest (would require 5 million HBD in savings for a year). So right now the 20% is perfectly sustainable for now even without considering its low overall inflationary impact. However I do not expect the 20% rate to last forever, at some point it will need to be cut. I've voted for a lower rate for a while but not strongly advocated for an immediate reduction because I think the "right" rate is unclear within a reasonable range including 20%, again, for now.
Agree that it will need to be cut. I do think the more committed you are to longer lock down savings gives you a higher APR instead.
Do you think that's reasonable?
That might be reasonable, but there is certainly a potential disadvantage to the blockchain here as well. If you have term deposits then the blockchain is stuck paying the higher rate for longer. That might be problematic, though it's probably workable if the amount locked is limited.
Locked staking has been a common feature among other savings/staking platform. This is why I think it has no issues on the user side. Regarding potential disadvantage, I can't see a deeper negative effect as what I foresee. But it gives Hive ecosystem a breather on the savings reward option. The more % we can save, the better for Hive because these returns are relative to the addition of Hive selling pressure in the market.
Since many have aired its concern on 20%, I believe it's best to address this issue asap or else we'll see its long-term effect. What do you think?
I wouldn't consider it a priority. We only have a few million in savings, despite the 20%.
Yes that to ... not sure would be able to calculate that one, that is like burning hive.
P.S. Do you have idea why Decmber was such a bad month?
It's certainly easy to calculate since numerically 5% of the HIVE converted is just destroyed with nothing in return. Interpreting what that burn means is less objective. I think a burn like that with nothing in return represents income to all HIVE/HP holders but others may disagree.
I don't know about December.
Your Baby is doing good work, congratz!
Well I've made more hive than I ever have in this bear market, im happy.
Okay I know that was off topic 🤣
Back om steemit I remember when the steem pegged dollar reached higha of 14 usd 🤣 it was insane!
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It is so cool to see this project both benefit the stable-ish price of hbd and create a revenue stream for the dhf, which can then be used to develop new use-cases for the blockchain
That was awesome indeed!
Made a huge difference for me
Thank you @smooth for the work and @dalz for the numbers!
Muchas gracias por la informacion.
That is an incredible performance, we hope it gets to its full potential.
This is one of the best information I'm reading this week. Great analysis. Hive is making impact in all areas.
Wow, I had no idea that HBD Stabilizer had daily volume like that, it's an amazing amount of transaction fees generated. I need to read this article a few times, I had no idea there was a consistent arbitrage opportunity, but and the volume seems sufficient to earn some income. I don't competely understand how the 3 day system works for the Hive HBD conversion, but hear about it a lot. Thank you
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