I think many of us are excited to see that our HBD savings is now earning 20% interest. For me, this is an incentive to convert any liquid HIVE to HBD and to funnel all earned HBD into savings. Of course, any HP earned will remain as HP. I have no intention of liquidating HP in the foreseeable future. There is distinct advantage to having Hive Power that is worth growing.
Inflation Offset
The official figures aren't out. We are looking at March inflation figures to be around 8.3 percent. We are seeing inflation in food prices, fuel prices, and all around. Dining out with my family has been shocking for the last couple of months. Municipalities that depend on sales tax are seeing an increase of up to 20% in sales tax revenue. Some of that is pent up demand from COVID lockdowns. However much of that is also a result of the increase in the price of goods and services.
Therefore, we can take about 8 percent off of the 20 percent return to arrive at a true return of about 12 percent. The reason we need to deduct the 8 percent is that HBD is pegged to the dollar. Therefore, any drop in value for the dollar ensures a drop in value for the HBD.
Let's keep in mind that the HBD's value is nominal. It will fluctuate in value in relation to the US dollar. It just so happens that the USD is the most stable currency compared to others. However, that doesn't mean that the dollar is the best store of value.
Store of Value
With this in mind, perhaps we ought to consider HIVE the better store of value over the long term. Whereas HIVE can fluctuate in price, HBD cannot. And, we are seeing that HIVE has seen an overall upward trend in recent months. With 20 percent interest on HBD, it is possible HIVE could surpass 20% growth as it becomes deflationary. Either way, you can't lose.
Long term, we may see issues with high interest. However, as this is not hard-coded into the Hive blockchain, we can appeal to Witnesses to reassess and adjust interest rates to meet future conditions.
I am excited with this development. This, even if it is temporary, makes the Hive blockchain a long-term hold, whether in HIVE coin or HBD.
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HBD is pegged to a dollar worth of HIVE I believe and not directly to the dollar which is a mechanism I prefer than having our crypto pegged to fiat which we are running away from.
On the other hand HP still remains a priority to me in accumulating while growing my HBD savings. Hopefully the 20% APR on HBD attracts and puts buying pressure on HIVE to convert to HBD.
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I have no doubt that there will be a positive impact on HIVE. Personally, I won’t power down to buy HBD.
Likewise, I am quite optimistic about things around here.
We hope for the best.
Enjoy the week ahead.
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Now that the witnesses have increased HBD's APR to 20%, the choice between investing in HIVE or Hive Backed Dollars is an interesting discussion.
Will the price of HIVE appreciate at a higher rate than 20% in a year?
Taking into account the burn mechanism required to create HBD and the incoming increase to liquidity that LeoFinance's pHBD-USDC pool on Polygon will provide, we could see HIVE actually become deflationary.
And we know which direction price heads when an asset's demand remains, but there is literally no supply to fill it.
Exciting times ahead!
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