Brazil raised interest rates first, now it is lowering first, seems like a good indicator of what to do with interest rates
Just after the pandemic hit, Brazil was among the first countries to start raising the interest rates, justifying that it was needed to fight inflation. When Brazil as speeding up the interest rate increase other countries were just beginning to increase their interest rates.
Image source https://tradingeconomics.com/brazil/interest-rate
But just recently the central bank of Brazil lowered the interest rates for the first time after a long streak of increases!
I am talking about Brazil and interest rates because I am brazilian, so I follow brazilian economy closely, but also because the interest rates are a hot topic now on Hive.
Brazil has been a good indicator. It started increasing the interest rates before inflation peaked, stopped raising as it peaked, and now it is lowering as inflation decreases.
At around the same timeframe on Hive we started increasing the HBD APR massively, now many witnesses are signaling for an APR reduction on HBD savings.
I am favorable to lowering the HBD APR, but I also want for HBD to stay as an attractive investment.
Cryptocurrencies are down and one of the major reasons for it is that central banks have very high interest rates, creating risk free investments with good yield. HBD is supposed to be safe, but the safety has not been enough to attract that many investors.
Brazil was the first major economy to start lowering the interest rates, but as other central banks follow suit then cryptocurrencies may start to become more appealing once again. If that happens we won't need 20% APR to attract investors, it may even scare some by sounding too good to be tru.
In general I would pay attention to what the central bank of Brazil does. Often they are on the vanguard in terms of interest rates.
Hive is not a central bank and definitely not a country, but because we have such a small economy (under 200 million USD in market cap) I believe it is reasonable that we take lessons from bigger economies. We do have wiggle room to test out stuff, but we need to be fast and adapt when something is not working. 20% interest rate was a good idea, it could have worked if the market conditions were different, but it was not enough to make Hive go mainstream even though it is probably the best yield on any DeFi platform, we are still way too small and for some reason most external users didn't care about the 20% APR.
As a witness, I am signaling for a 16% APR for now. I am considering adjusting it to 17% only because most witnesses are signaling a very sharp drop, from 20% down to 12% at once, that does not sound reasonable to me. 12% is juicy yield, it beats the market, it beats other DeFi platforms and it is still attractive, but we should get there gradually, not at once IMHO.
I hope that by keeping an APR realistic with current and future market conditions HBD can be seen as a reasonable investment option. We could afford a 20% APR, but I assume outsiders would look at it suspiciously when the world starts lowering their interest rates. If we stay ahead and instead lower our as the globe lowers theirs then we will be seen as mindful, reasonable and realistic. But nothing is absolute in such a small economy.