I agree that the conversion mechanism is not an arbitrage thing. Actual arbitrageurs keep an eye on multiple markets and if they see bananas are cheaper in Minnesota than Minneapolis, they re-route them tactically. Making sure enough bananas arrived from Colombia is usually someone else's business.

HBD<->HIVE conversion is the strategical level. The difference between HBD and banana situation is that it is easy to get an extra shipment of HBD so arbitrageurs can easily service themselves even though they usually prefer not to touch it.

The casuals are less sensitive to having the funds locked over 3.5 days than the arbitrageurs. Ironically, they are also more scared by the price insecurity, while arbitrageurs understand that a big HBD pump raises HIVE price so the 3.5 day median is a big favourite to be the better price than the instant trade.