Are Witnesses colluding for price manipulation?

Today STEEM market prices fell below 30 cents level but SteemNow and other platforms still show $0.40 as internal STEEM price. This has led several Steemians to confusion. Some has gone even as far as to allege this as some price scam or price manipulation by a sort of carteling among some witnesses.

It's true that it is about a month that STEEM market price never reached over $0.40 but the median price feed was stuck at $0.41 all these while. It has only fallen today but only by 1 cent and is currently at $0.40.However market price (on Binance exchange) is at $0.27 per STEEM at the time of writing this.
So why is STEEM's price on Steem platform about 50% higher than its actual market price?

Well, most of you are already aware that Steem platform takes into account the median market price over the past 3.5 days period. So there will always be possibly some difference from the actual market price.

But this argument too doesn't justify current level of $0.40 as STEEM never touched that level in past 3.5 days. So how could it ever be the median price?

Yes, I can understand this counter question and the logic being put forward against the current illogical prices by many Steemians who understand that it should always be a 3.5 day median market price.

Let me tell you :
No, it's not always the case ...not after the Hard Fork 20, though it holds true most of the time.

In fact, I too was wondering about it. Then I stumbled upon this post by @oflyhigh. It beautifully explains the current scenario.

In HF-20, we modified the SBD printing debt percentage. Earlier SBD printing used to proportionately throttle when SBD's market value reached between 2% - 5% of STEEM & SBD's total market capitalization. And if it reached over 5%, SBD printing was stopped and all payouts were made in the form of STEEM & SP. (For more details on it, please read my earlier post here) In HF-20 this ratio was changed to 9%-10%

Current STEEM price being used is beyond the control of any Witness

The following blockchain code dictates that median price be fixed in such a manner that SBD prices never get over 10% of the total market cap of STEEM & SBD.:

if( has_hardfork( STEEM_HARDFORK_0_14__230 ) )
{
// This block limits the effective median price to force SBD to remain at or
// below 10% of the combined market cap of STEEM and SBD.
//
// For example, if we have 500 STEEM and 100 SBD, the price is limited to
// 900 SBD / 500 STEEM which works out to be $1.80. At this price, 500 Steem
// would be valued at 500 * $1.80 = $900. 100 SBD is by definition always $100,
// so the combined market cap is $900 + $100 = $1000.

           const auto& gpo = get_dynamic_global_properties();
           price min_price( asset( 9 * gpo.current_sbd_supply.amount, SBD_SYMBOL ), gpo.current_supply );

           if( min_price > fho.current_median_history )
              fho.current_median_history = min_price;
        }

Thus when STEEM market prices tend to fall so that SBD market cap can become greater than 10% of combined market cap of STEEM & SBD price then median price feed of Witnessess will be ignored and it will be decided by the above code to maintain SBD market cap at 10% of total market cap of STEEM & SBD.

Now this makes sense as STEEM blockchain guarantees to redeem every SBD with 1 USD worth of STEEM. So it is in the interest of this blockchain system to maintain STEEM's prices in such a way that it can always fulfill its promise to redeem all SBDs for STEEM if and when presented.

I don't know how this should be interpreted. But one thing is certain that the current price feed being absorbed by the system is beyond the control of any Witness node and Witnesses shouldn't be apprehended or blamed for it.

Then who is scamming whom?

In fact, if someone wants to call it as some scam then my personal interpretation is that this scam is in-built in Steem blockchain code and that is a price manipulation through code to honour its own commitment of redeeming SBD at whatever rate that its internal price feed decides.

But today there is sufficient liquidity in the market and one can always use Steem's internal Market to convert SBD to STEEM where one can get the real market rates. And it's about a year now that "Convert To STEEM" button has been disabled and taken off from Steemit's wallet. So I don't think that it should be labelled as any scam.

But in the eventuality there is no buyer for SBD in the market, there won't be any option to convert 1 SBD into $1 worth of STEEM at the current market rate of STEEM. In that case STEEM will be paid by the price decided by STEEM blockchain which is around 50% higher than the market price.

• Would you call it a scam?
• If so then what's the way out?
• or is my understanding of the system flawed?

Do share your opinions.

Thank you!