The 7 day conversion comes with a certain risk, which is priced in on the SBD market. If you convert, you'll be subjected to Steem price changes in that period. Seems like the market expects Steem to go down.
0.85 cents is a very big spread though, Steem would have to drop ~30% in the next week for conversions to be a losing decision.
Hey, you mind going into more detail? It sounds like you may get it... and I still do not.
So-- when I do a 7 day conversion, what happens behind the scenes?
If the market expects that STEEM will go down, then..... SBD will trend lower because.... ?
Sorry, it seems to me like you're the best hope of really understanding this mechanism better than I do now :).
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When you request a conversion, the conversion rate is base on the median price in coming 7-days (sampled hourly).
So if the market expect a fall of 30% price linearly in next week, that means your SBD is expected to be converted at 15% discount from current price.
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This could also be another reason for the price to be a bit lower. Again, howerver, SBD is not "broken"... it more needs to grow up and be tweaked a bit over time more than likely.
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High inflation of STEEM one of the most significant risk that's being factored into this 7-day lock-in period.
as pointed out by @hisnameisolllie in his article: STEEM Dilution Rate - MUCH higher than you might think… at current level the dilution rate of STEEM is nearly 1% per day. That means the STEEMs you get 7days later is worth ~7% less compared to instant conversion.
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Yet another great point! You guys are rocking this discussion!
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