HBD is probably my favourite crypto. Even more than Bitcoin. HBD generates interest, which BTC doesn't, and hasn't been captured by legacy finance businesses, which BTC has.
Source - I used the HIVE logo and re-coloured it in Paint !
But however good HBD is right now, it does have a problem.
It's pegged to the US Dollar.
The Dollar's Problem
The US Dollar has been the world's reserve currency since around 1945. But over the last few years, that position has been increasingly challenged.
Factors which have caused this to happen include;
- The US freezing dollar-denominated reserves of countries it doesn't like, or blocking access to SWIFT and the banking system. This damages trust and makes any country with dollar reserves look for alternatives (including both China and Saudi Arabia).
- Unilateral sanctions against businesses and banks all around the world. The US recently sanctioned numerous Chinese entities, including state-owned ones, and particularly ones involved with electric car manufacture. China responded not with sanctions, but by dumping £53.3 billion of US treasuries in the first 3 months of 2024, and by putting $47 billion into a semi-conductor R&D fund.
- The rise of BRICS. As an alternative to the American banking system, BRICS encourages members to trade in national currencies, and important new members have been joining over the last year or so. They also claim to be quite far advanced developing a digital payment system which it is rumoured may be blockchain-based and pegged to the price of either gold or a basket of member currencies.
- De-dollarisation by China and others; with dollar reserves no longer safe, many countries are starting to trade in national currencies. Particularly, Saudi Arabia is staring to sell oil to China for Yuan.
- Massive money-printing by the Federal Reserve. Covid and the war in Ukraine have been paid for by printing and borrowing money (often the same thing), not by raising taxes. This is effectively creating a debt, and at the beginning of March 2024 the US National Debt was at around 130%, a worrying level. More money is chasing the same volume of goods and services, leading to rampant inflation, the level of which I believe is being blatantly understated by the US government.
It is this last point which may be most relevant. The spending power of the US dollar has dropped by 98% since 1971. To look at it another way, the value of gold has remained constant, it's just that you need more dollars to buy it.
The dollar is a long way from disappearing, but it's value and use as a reserve currency appear to be steadily diminishing.
How Does All This Relate To HBD ?
Quite simply, as the dollar gradually slides in value, so does the value of anything pegged to it.
If the price of gold goes from $1970 to $2167, that's the same as the dollar losing 10% of it's value. From my perspective, I look at it in British Pounds. So if the pound's performance is not quite as rubbish as the dollar, the HBD I'm holding are worth less if I have to convert them back to pounds (which I don't plan to !)
If the US financial system has some kind of systemic shock, as it did in 2008, then the dollar will slip in value faster and potentially quite significantly, and will take HBD and all the other dollar-denominated stablecoins down with it.
What Is The Solution ?
I believe we should consider moving HBD away from being solely pegged to the US dollar.
Natural candidates could be the Chinese Yuan (although there's a risk of currency manipulation there), gold (volatile, but not Bitcoin volatile !), or perhaps whatever BRICS comes up with in the next year or two. The one thing I feel we shouldn't tie it to is Bitcoin or any other crypto; too similar, and too volatile.
Totally dropping the dollar would be a complex exercise and would be likely to take many Hivers out of their comfort zone.
So perhaps a solution would be to have two reserves for Hive; the HBD, and a gold-backed stablecoin, let's call it HBAu.
It adds complexity, but could also create an additional stabilisation mechanism. Perhaps even one that doesn't get used to pay out developers and is purely dedicated to stabilising HIVE and marketing the ecosystem. Of course, it also creates a new internal trading opportunity for Hivers. I'm not sure if we'd need to buy actual gold to back it's value, and if we did how we'd secure it (the biggest risk would be someone on the "inside" pilfering it !)
Another intriguing possibility, although I don't know how (or even if) it would work, and how it would relate to the HIVE and HBD, might be to create a gold backed LEO stablcoin - LEOGOLD or some similar name. It could stabilise the LEO price (and perhaps the whole of the Tribe Token ecosystem) and add massively to interest in the LEO token, but I have no idea how it would relate to HIVE and HBD !
What do you think ? Is this a crazy idea ? Are there better ways to wean HIVE off dependency on the slipping US dollar ?
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