How Is The Hive Debt Doing During The 2022 Bear? | Data On HIVE/HBD Supply and Historical Debt

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(Edited)

The Hive native stablecoin HBD keeps on with the grind and keeps improving. Its been more than a year since the introduction to the two ways conversions that has improved the whole ecosystem a lot.
On top of the improved conversions, the @hbdstablizer thanks to the growing funds in the DHF has contributed to the stabilization of the HBD as well. Conversions are not instant and are a bit of slow, takes 3.5 days, at a cost of better security and price feeds. Because of the delayed feedback a lot of the times there can be offsets in the HBD peg, but thanks to the stabilizer and its incentives it provides instant liquidity on the internal market.

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The Hive debt is calculated according to the following formula:

DEBT = HBD in circulation / HIVE Market Cap

I have posted in details how exactly is the Hive debt calcuated. There are some nuance when calculating the debt as it is not straight forward. A few things to consider is 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
  • Debt in corelation with other mettrics

The period that we will be looking at is from the beginning of the chain with a closer look at the 2022.

HIVE Supply

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.

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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 for a long time.

When we zoom in 2022 HIVE supply we have this:

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This period represents the recent happenings. At the beginning of the year the HIVE supply was 370M, while at the end of August 2022 it is 386M. A 16M more HIVE was added in eight months or a 4% inflation. The year is projected for around 7% inflation.

The virtual supply at the end of August was 436M.
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:

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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 August is 240M. It is a 60% drop in the market cap. This type of contractions in the market cap can push the debt above its limit.

HBD Supply

Next for the HBD supply.
Here is the chart for 2022.

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Note: This chart doesn’t include the HBD in the DHF that is now a dominant HBD holder with 18M.

As mentioned, the HBD in the DHF is not included when calculating the Hive debt. Because of this we are only looking for the freely circulating HBD supply.
At the begging of the year 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. Now we are around 10M. A 30% drop in the 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.

Hive Debt

When we apply the above, at the end of August we get this:

DEBT = HBD in circulation / HIVE Market Cap
DEBT = 10 / (436M * 0.55) = 4.2%

A 4.2% debt at the end of August 2022.

The chart for the historical debt looks like this.

image013.png

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, ad then again in 2019 and it lasted for a six months continuing in 2022.
Recently 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:

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No debt breaching in 2022!
The year started with a very small debt of just 2%. Now we are above 4%. A steady and slow increase of the debt. While this is doubling the debt, we are still in the safe zone, far from the 10% limit. With the next HF the limit will be set at 30%, so HBD will be even more secure.

As we have seen from the above the market cap has dropped for 60% and the HBD supply for 30%. Because of this we have a slight increase in the debt from 2% to 4%. The debt is highly corelated with the HIVE price, so if it change fast so can this numbers.

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 there 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.

image017.png

We can notice some trends here. Usually the increase in the debt follows after a spike and a drop in the market cap. We can see this clearly in 2018. But then there is another increase in the debt in 2019. The market cap has dropped again in the period but not as much.

What’s interesting in the last year, first there was an increase in the debt level and afterwards came the increase in the market cap. This was because of the huge movement in the HBD price in August 2021, when a lot of HIVE was converted to HBD. In 2022 we can see a decrease in the market cap and a slow increase in the debt levels. A more stable period.

Debt VS HBD Supply

Here is the chart when we plot the debt against the HBD supply.

image021.png

Here again we can notice some patterns. Usually a period of fast creation of HBD and then an increase in the debt levels.
It’s not always the case, as we can see in 2019 when the HBD supply was going down, but the debt kept growing. This is usually because the market cap is dropping fast as well.
In 2022 we can see a drop in the HBD supply up until recently and a slow increase in the debt.

Debt VS HBD Prices

The one thing that everyone around doesn’t want to see is a drop in the HDB price. But HBD loosing its peg is by design and it has happen in the past. The debt is the key parameter when this happens.
Here is the chart.

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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%.
Worth mentioning that since the creation of Hive, March 2022, HBD has not dropped under $1. With the following hardfork the debt level will be increased to 30%. The ATH for the debt was 18%. If this ever happens again HBD will not lose its value.

Live data for the hive debt here:
https://hive.ausbit.dev/hbd

All the best
@dalz



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16 comments
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Hope that new HF measures will attract more investors to HIVE and, in particular, to HBD staking

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(Edited)

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DEXs might be the better option for listing HBD. What the leo team is doing is a step in the right direction, we just might need a decentralized bridges with multisig and liquidity pools incetevized with DHF funds.

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I believe progress awaits to see HBD on top someday

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Thanks for sharing this awesome information.

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If bitcoin will increase later, of course we hope that hbd goes up too

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Thanks for the information, hive on!!

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I don't see any merit in increasing amount of HBD in the system just to have more of it. Increase of debt limit means HBD has more room to grow organically before the haircut. By "organically" I mean as a means of payment for goods and services offered on Hive.

People are used to pay in fiat currencies, they have the intuition what price levels are acceptable and which are too expensive, merchants are also comfortable dealing with dollars, so HBD seems like an ideal coin to use in shops that want to offer their products for crypto but without volatility attributed to crypto. Hive with its social capabilities adds convenient way of communication with customers. That is a good environment for natural demand for HBD. But hitting hard cap sacrifices peg to dollar, which might spook the merchants. Increasing debt limit reduces such possibility even in case of heavy bear market, but the possibility increases with amount of HBD in the system. Therefore debt level being far from haircut level should be seen as positive thing, not an indication that HBD needs to become more popular.

We did hit hard cap relatively recently (a year ago), for a short time, soon after Hive-to-HBD conversion was introduced and people started using it. Thankfully the novelty usage died out and now we seem to be in a good place with debt level.

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Atm the main use case for HBD is defi farming. The 20% APR and and some other places that the leo team provides, lik bsc and polygon.
There are ofc payment use cases, games have it as paying option, I pay my Privex servers with HBD, and some latin countries have even more usage for it... but its still small... hope to grow in the future

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First think about HBD. Apart from solving the liquidity problem, HBD should be included in the popular exchange sites. Popular exchange sites have Hive tokens but not HBD.

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