The idea is sell HBD for Hive. Use the Hive to borrow HBD from the blockchain at the rate it is treating as the real price and then buy back HBD will I have more after than before?
In my initial test, I converted 48 HBD into 105 Hive. Then I used Hive to borrow 22 HBD. The dollars were then sold on the open market. The Hive price was in the low 40s and the convert price turned out to be about 21% higher. So, later I did profit but most of the profit was from a gain in Hive. Now if you can repeat this dollar cycle procedure you will profit greatly. The bad news is, the conditions are not right. The convert price is 0.52 $/Hive, and the sell and buy price is 71¢.
So what if I borrowed 100 HBD today? I have to put up collateral. Say I borrow $100 HBD with 378 Hive as collateral. We immediately get HBD. Eighty-four hours later, some of the collateral will be kept in exchange for the dollars and the rest will be returned. The rate we are charged is determined after 3.5 days. So we have some unpredictable aspects of this. Let's assume it is close to today's rate of 52¢/Hive.
| Date | Liquid | Debt | Collateral | comment |
|---|---|---|---|---|
| tonight | 400 Hive | - | - | initial state |
| tonight | 100 HBD + 12 Hive | 100 HBD | 378 Hive | convert Hive to HBD |
| tonight | 152 Hive | 100 HBD | 378 Hive | bought 140 Hive for 100 HBD |
| Wednesday morning | 338 Hive | - | - | Hive charged and the rest of collateral returned. |
The borrowed dollars can be used to buy Hive. That's 140 Hive. How much of our collateral (378 Hive) will will we lose after the 84 hours after the borrow operation? If the lend rate stays the same (52¢/Hive) the $100 HBD will cost us cost $100/0.52 about 200 Hive the end if the convert rate stays about the same.
That's a loss of 60 Hive out of 400 Hive invested. A loss of 15%. I have resolved to wait for the convert rate to be somewhat higher than the buy rate for Hive (the best sell order)
