RE: Steemit For Investors #2 - How Steem Dollars Hold Their Peg to US Dollars - By Leon Fu Dot Com

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Steemit For Investors #2 - How Steem Dollars Hold Their Peg to US Dollars - By Leon Fu Dot Com

in steem •  9 years ago 

$19 of Steem is generated to back 1 SD? Wouldn't that devalue the STEEM trading price because there are now at this time approx. 5 STEEM backing every SD?

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9 years ago by

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      ·  9 years ago (edited)

    Yes, if there was a sudden collapse in the price of STEEM, and no recovery in price, the peg may break. Quote from the white paper:

    For every SMD Steem creates, $19.00 of STEEM is also created and converted to SP. This means that the highest possible debt-to-ownership in a stable market is 1:19 or about 5%. If Steem falls in value by 50% then the ratio could increase to 10%. An 88% fall in value of STEEM could cause the debt-to-ownership ratio to reach 40%. Assuming the value of STEEM eventually stabilizes, the debt-to-ownership ratio will naturally move back toward 5%.

    Leon Fu

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        ·  9 years ago 

      Thanks Leon

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          ·  9 years ago 

        Good read! @leon-fu its a good thing ive been follwing you at twitter. Very informative, perfect for crypto traders that are non technical like me

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            ·  9 years ago 

          Don't forget, crypto being crypto, we will see the moon and we will watch it crash hard, many, many, many times :)

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              ·  9 years ago 

            True, which is why Steem Dollars were created to protect Steem users.

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