Short answer = conversions. But let’s look at some details.
As per the latest report on Hive inflation, it has been running hot for a third month in a row. The yearly Hive inflation for 2024 is projected around 6%, while we are now on the way to reach 10%. The monthly projected inflation is set at 0.5% and we are above 1% for the last three months, with August almost close to 1.5%. Double and almost triple on a monthly basis.
When we look at the structure of the new HIVE put in circulation for August 2024, we got this:
Short answer what is causing the additional inflation = conversions. This is not new, conversions are the thing that is the most variable in the Hive inflation.
Ok, but who is making these conversions. Here is the list:
Accounts that converted 1000 HBD to HIVE and more in August 2024.
Obviously the @hbdstabilizer is dominating this chart. It has converted 1.1M HBD to HIVE, creating 5.9M HIVE in the process. For reference the regular monthly HIVE inflation is around 2M.
But why does the stabilizer convert so much HBD to HIVE?
To support the price of HBD.
The stabilizer receives HBD from the DHF, 12k per day, or 360k per month. Additionally it receives beneficiaries rewards from the @hbd.funder account on comments voted by some of the top holders. For August these rewards were around 260k HIVE equivalent.
When it receives the HBD from the DHF it converts it to HIVE and then buys HBD on the internal market with that HIVE. Then it sends back the HBD to the DHF. As the price of HIVE drops it needs more HIVE to support HBD.
Now the next question will be who is selling HBD?
Here is the chart:
@keychain.swap on the top here. It’s a service from keychain for HBD swaps. So, this is a combination from a lot of users. @konvik-hbd is a trading bot on the internal dex buying and selling. Sort of LP. Then comes @newilluminati and @orinoco that is an exchange service.
Obviously, there are no significant big trades here, it’s mostly regular users with the top one doing something like 10k to 20k per month.
On the HBD creation side, author and interest rewards are around 100k HBD each, while the DHF payouts are 234k. So DHF payouts are the main way how HBD is entering circulation these days.
In Summary:
The drop in price of HIVE is leading to more HIVE being created to support HBD. The @hbdstabilizer that is sort of LP for HBD is using a lot more HIVE to support HBD.
Should we reduce the stabilizer funding? Maybe cut it all for the time being. The cons of this would be more volatile HBD price. Can’t really tell. Even if we cut all the funding for the stabilizer the users always have the option the convert HBD to HIVE themselves. Maybe reduce the stabilizer funding in half?
The ultimate backstop for this cycle is the haircut rule and HBD devaluation. If the market turns around in the meanwhile that will help a lot as well.
Any thoughts?