The crypto market has unique cycles that comprise bull, bear, and consolidation phases. While the bull is the best time to make gains, the bear is a stress test for crypto projects to survive or die out. According to the phase of a complete cycle, the projects adjust their operations and take necessary actions.
At that point, Hive backed Dollar, the stablecoin of Hive ecosystem, may have some pre-determined APR for HBD on Savings accounts. In the current mechanism, the witnesses sign the APR that they want to employ. According to the majority of witnesses' votes, the interest rate is deployed on Savings.
In terms of decentralization, this is a big plus. The witnesses, like Deathwing did in his post: Feedback Regarding HBD APR, consider what the community wants to adopt the new APR. Eventually, the community members and witnesses collaboratively decide on the changes in Hive ecosystem.
Hybrid, Cycle-sensitive, HBD APR
I would like to focus on the bigger picture that is beyond Hive ecosystem. We may adopt an Hybrid APR system for HBD Savings that will be adjusted considering the market conditions.
In this projection, the witnesses do not need to focus on the APR for HBD, rather, the majority of the focus will be directed to the timing of APR shift regarding the performance of market.
In a bear market, offering 20% interest for a stablecoin is a nice service as the coins lose value in a downtrend. When strong support lines are broken and the market shifts from bull to bear, the witnesses may start to sign a shift and choose to increase the APR rate.
What happens when HBD offers 20% in a downtrend?
First of all, I want to highlight an important concern: we need to be cross-chain and HBD listing on CEXs will be very useful.
In the case that a person holds X coin or stablecoin when the bull market is finalized, s/he will be looking for either stablecoin pools for a safe investment or s/he will take out the money from crypto. If HBD can persuade this guy to buy HBD and put into Savings for 15% - 20%, then it will be a win-win case for both sides.
What kind of win-win?
Each HBD consists of some HIVE inside. Thus, We can see HBD as a stabilized version of some HIVE units. When USDT is traded for HBD on a CEX and put into savings, this can be seen as an indirect HIVE renting operation via HBD interest.
This may sound like an unrealistic idea but just agine its positive impact if we can successfully onboard new people who would come for HBD Savings.
IF HBD on CEXs drains, people will convert their HIVE for HBD and scarcity of HIVE might also happen even in a harsh bear market.
Lower APR in Good Times
HBD is a protector of purchasing power.
When the market's next phase is the beginning of a bull market, then we do not need $1 stablecoin. Rather, we need cheap HIVE, BTC, ETH, ARB, etc.
If the APR on HBD starts to drop in a green market, it will be another factor that may make HBD holders turn the funds into HIVE or other coins. The only risk in this case is the sell-pressure that HIVE may experience if we cannot find a HBD listing on a popular centralized exchange.
If we get HBD listed on a popular CEX -> Turn HBD into USDT
Without CEX listing -> HBD to HIVE; HIVE sold for X,Y,Z coin
This is why HBD needs to CEX listings.
Criteria for APR Chance
I think this is the point where we can utilize technical analysis.
The daily chart might be very volatile but weekly charts can be very useful.
The moving averages often help investors spot a trend in the value of assets. Thus, my humble suggestion is tracking 20-week Moving Average (Crossing Up, Crossing Down)
If it is an uptrend, the APR can be lowered gradually. On the other sides, once the downtrend is confirmed via 20-week moving average crossed down, then APR can start to go higher.
For a better confirmation, to eliminate fakeouts, 2 weeks period can be added, as well.
Adopting a hybrid system might open a new, an visionary, door for HBD if it is supported with CEX listing.
What do you think about this idea?
Share your thoughts below 👇
Hive On ✌🏼