On October 3rd Lawerence Linden posted this in the Blog:
"In the second half of September we sold L$20,117,994 to prevent rapid appreciation of the L$. Two separate forecasts of what level of L$ sales are likely to be required in October to prevent rapid appreciation of the L$ show this source of L$ exceeding the sum of the L$ sinks. Because there’s no reasonable way to increase L$ sinks that much in the first half of October, we’re left with removing this limitation “4) Sales will be volume-restricted based on Linden Dollar sinks. In any 30-day period, we will not sell more than Linden Dollar sinks in the past rolling 30 days.”"
The policy being changed was posted on August 31st when Lawerence posted this:
"LindeX L$ Average Rate Spike
Recently the average LindeX exchange rate spiked more than we’d liked to have seen. This spike occurred during a time when fewer than normal L$ were listed for sale on LindeX. In this sort of situation we would like to list enough L$ for sale to limit exchange rate movement, but Supply Linden’s LindeX tier was quickly exhausted. This was noted by some market participants which likely lead to an even greater change in exchange rate.
In a clarification on that same blog post Lawerence said this:
"Instead to protect against increases in the L$ to US$ exchange rate we have to bias the system to require us to sell some L$ each month to keep the rate steady. Thus our action in times when the rate is increasing too quickly would be to cut our new L$ sales. In times when the rate is decreasing too quickly we would increase sales. I know its not as elegant as being able to offer to buy L$ but we just can’t do that."
I undertatnd that LL is using the average daily rate to measure this and that all makes perfect sense. My question is what does LL consider a rapid appreciation of the L$ or depreciation of the exchange rate?
The event that prompted all this was the decline in the exchange rate that started on August 22nd when the exchange rate was L$298.86/1 and ended on August 26th when the exchange rate bottomed at L$277.83/1. That was a 7% decline in just 4 days so I can see the concern. Of course the exchange rate rebounded by August 29th back to L$289.69/1 but that isn't the point. The point is on October 21st the exchange rate hit a recent low of L$272.25/1. On November 3rd the exchange rate set an even lower low at L$271.90/1, that is decline of .13% in 13 days. OMG what to do the ecxhange rate is crashing? I know lets go sell L$9,173,043 on November that should stem the crash. Don't you think you are overacting just a little?