Hive>HBD Scheme on Upbit?

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This is a long post, but I'd really appreciate some input on it.

Centralized Liquidity on Upbit

I had an idea when @demoturk shared this image of Hive showing the distribution of it on all of the exchanges. The graph is from @arcange and it reveals a dramatic picture. Liquid Hive is continually growing on Upbit while it has been somewhat decreasing on other exchanges.

Centralization of liquidity is often an underlooked subject and a problem since it contributes to volatility in Hive's price and could constitute an attack vector for the network. There is now almost 100M Hive stored on Upbit which is around a quarter of the total supply. Way too much. The problem is that it is "stuck" on that exchange since it is only accessible by South Koreans. This is a general risk/problem for Hive and there is seemingly nothing we can do about it currently.

Last year I did some investigation on the Hive pumps and found that they almost always occur at 00:00 UTC and originate on Upbit. To me this suggests that a relatively small group there initiates these pumps in order to dump it on people that buy into it. This isn't anything special and happens for most coins. Although the problem for Hive once again is that the exchange is off limits to 99% of the people which means that we cannot really do anything against it. The bottom line is that there seems to be a small group of people on Upbit that is able to manipulate Hive's price and is capable of doing so by holding millions of Hive and dollars.

Whales on Upbit seem to be "exploiting" Hive>HBD conversions

Now there is a big dent in the chart above. In August of 2021 Hive was suddenly (in a span of about a month) pulled from the exchange in massive quantities. Overall about 38M Hive was taken from Upbit of which was mostly put on the blockchain. We know this because the Hive doesn't show up on other exchanges. In fact, there is a similar trend in all exchanges which means that almost everyone deposited Hive to the chain (but by far the biggest deposits came from Upbit). There is an obvious reason for that development, but I am arguing that this reason is the response rather than the action that triggered this : In July of 2021 the chain introduced Hive > HBD conversions which meant that it became profitable to make this conversion once HBD broke its peg to the upside. In other words, one could conclude that a massive HBD pump would trigger people to send Hive to the chain and convert it to HBD in order to sell it then for a profit. But I have a different take on it in this case (although in general that is definitely what we should expect).

The Hive to HBD conversions offer a very unique mechanism in the crypto space. I think it actually only exists on Hive. Essentially what this means is that one can "sell" Hive without actually selling it. Converting Hive to HBD means that one burns Hive and one receives an equivalent in HBD (50% instantly, the other half over a 3.5 day period). This action does not affect the price of Hive on the markets. The only way it could is by signalling to the market that Hive has been burned which means that its total supply has decreased and price should therefore go up. However, we know that the market in general does not respond to these burn events very rapidly (if at all). This allows an actor, preferably a whale to sell massive quantities of Hive without affecting the price. This is a big deal, especially since Hive does not always have a high trading volume. In other words, if you were a whale trying to sell e.g., 10M Hive on the market you would dump the price by a large percentage. But converting it to HBD does not(!).

Obviously this only works if there is also an offramp for HBD. But it just so happens that Upbit has the highest liquidity of HBD on the market.

In fact this chart gives us a further insight into this scheme. We can see that in August of 2021 massive amounts of HBD were sent to Upbit. Overall around 16M (!). This deposit coincides perfectly with the Hive withdrawals from Upbit. In other words, a relatively small group of whales sent Hive from Upbit to the chain, converted Hive to HBD and then sent the HBD back to Upbit. The stark increase of HBD deposits to Upbit is indicative for the relatively fast Hive>HBD conversions, but we can see that it took much longer for the supply there to decline. This is obvious if one wants to dump HBD more gradually on the market. In fact it took around 6-7 months for the supply to reach pre spike levels.

Pumpin' HBD

But why stop there? Whales could increase their profits by doing an additional thing. They could pump HBD. Why would they do this? Because they just purchased massive amounts of HBD and want to get rid of it. If they can pump HBD and then being able to sell HBD they would receive an additional profit. Did this happen? Yes. Again, I am arguing here that the conversions were not a response to the HBD pump, but that the conversions actually triggered this pump (because whales wanted to use their pump as exit liquidity on other speculators)!

The chart above proves this in my opinion. We can see that the pump (which was modest, but still significant) started just during the August 2021 time window. But more importantly, the peak was well after whales started to convert their Hive to HBD. The peak was also very prolonged with it being above the 1.1 threshold for around a month (!). Whales would have been obviously interested in trying to maintain this pump for as along as possible. Ultimately, however, they knew that it wouldn't last long as they were trying to unload more than the market could handle. If you were wondering where whales sold their HBD into, I should probably mention that there is a HBD/BTC pair on Upbit. This is the perfect pair to dump HBD on the market without affecting Hive.

Conclusion

I am not saying that all whales on Upbit took advantage of this scheme. In fact, the whales that did do this (I can't prove it 100%), would rely on other whales to dump the price of Hive in the long term so they could ultimately buy the lows again. The fact that the supply of Upbit has risen to now more than 100M suggests to me that these whales are still around and interested in another Hive pump (and >HBD scheme) in the future. While this isn't great, it does suggest that they would eventually be interested in pumping Hive's price back up.

We could see something similar happening in the future by paying attention to the Hive and HBD supply on Upbit. Should it once again dramatically decrease and the HBD supply increase, I think we would shortly thereafter see another HBD pump. Would they be doing this now? No, because Hive's price is low and they would want to do this when it is high without affecting the price. This would probably be at former ATH levels.

I would really like to get some input from @dalz and @edicted on this one.

Caveat!

I feel a bit stupid now, but I just looked at the chart of Hive's price and I could have sworn that Hive was at higher levels than what we actually had... Hive was trading at only around 50 cents to $1 in that time frame. So if whales did this, they were actually not the smartest as Hive's price shot up an additional 300% after the conversions finished (or was it the market's reaction to a reduced Hive supply after all?). Is this idea now invalidated? Maybe (I mean even whales can't predict the future), but I think what this post showed that one could be "selling" Hive without selling it, which could be useful to some.