How to profit from enforcing the HBD peg TODAY.

The title of this post is meant quite literally - there is an opportunity to profit enforcing the HBD peg which may only exist now, or perhaps for 3 days from now.

@hbdstabilizer has begun to convert HBD to Hive. This functionality was just introduced this morning.


Every hour for the last few hours, the stabilizer has converted about ~1660 HBD in order to begin stabilizing HBD. However - this does not actually add any buy pressure to HBD immediately, not directly at least, because conversions take 3.5 days to complete. After that time if HBD is still below $1 in price, it will start selling Hive to buy HBD. It will be a pretty major source of buy pressure on HBD and sell pressure on Hive. In the meantime, it doesn't directly do anything.

Currently the ask price on Bittrex for HBD is 0.00002343 BTC, or ~$0.94. Let's suppose you spent $100 to buy HBD right now, you would get 106.497 HBD (after fee). After 3 days, the HBD stabilizer will introduce buy pressure until HBD is priced at $1. Sell for $106.12 (after fee). If you had withdrawn to your personal Hive account, you will also collect a small amount of interest eventually, at 7% APR.

This is a pretty low risk endeavour for an expected 6% return in ~3 days. 6% in 3 days is equivalent to 730% annually. There are of course still risks:

  1. Although the stabilizer will introduce a lot of buy pressure, it's possible that for some other reason there is major sell pressure on HBD, and it is not able to quickly bring the price back to $1. In this case you may be forced to wait longer, sell HBD for a lower price, or make the conversion yourself.
  2. You may want or have to sell at bid price instead of ask, which will slightly lower to profit.
  3. There are the general Hive/HBD systemic risks, if Hive inflation gets very high it may shake confidence in both Hive and HBD.
  4. There may be other risks I have not accounted for.

However, on the whole I would argue that an expected 6% return in 3 days massively outweighs the risks mentioned. This is likely a transitory opportunity, only because the stabilizer has just started doing these conversions (barely anyone has been converting up till now), and the market will learn to arbitrage it away, with market makers who regularly buy below $1 and sell at $1, and convert when the price begins to diverge from the peg.