Exponential Growth Through Steem Engine Tokens

Few of us are really attuned to how the forex markets work and what exchange rates really mean. It is something that is not really necessary in our day-to-day lives. Perhaps when we are doing some international traveling, we might check out the exchange rates to try and stretch our money as far as we can. Outside of that, it is of little use to us.

The thing we are most concerned about is purchasing power. Most of the major fiat currencies are stable in this regard in terms of purchasing power. Inflation reduces this amount over time yet it is not enough to really notice. Instead of the currency fluctuating, it is often the product that rises and falls. For example, we know gas prices are affected by a host of factors beyond currency. The same is true for food.

A stock that is priced in dollars will rise and fall on a daily basis. This is due to the trading of the asset as opposed to the currency movement, at least in the short term.

Of course, this does not apply to a situation such as Venezuela with the Bolivar. A currency crisis can eradicate the purchasing power very quickly. The price of a gallon of milk is skyrocketing but not because milk prices went up. The hyper-inflation is at the core of this issue.

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Being involved in cryptocurrency opens us up to new areas. Anyone who is dealing with multiple tokens is in the currency game. Here I am going to cover something that I have not seen discussed on here.

For this example, I will use three currencies: USD; STEEM; LEO

Since I am using three currencies, some might jump to the conclusion I am going to focus upon arbitrage. This can be a very profitable way to trade but it is outside the scope of this article since present lack of liquidity makes it unlikely to work.

Right now we are going to use the following prices for STEEM and LEO

STEEM $.14
LEO .14 STEEM

We will presume there are 1000 each of STEEM and LEO held.

Under this situation, the numbers look like this:

STEEM $140.00
LEO 140 STEEM or $19.60
Total USD 159.60

This is pretty simple to follow.

Now, we are going to see the power of having both sides of the trade. In this instance, I own both STEEM and LEO. Since LEO is paired with STEEM, I benefit if one of the two tokens increase. We are going to conclude that the USD is fairly stable, at least in the short term. Looking at this process over a decade could bring about an entirely new set of circumstances with fiat.

Let us show the scenario with the price of STEEM doubling $.28.

STEEM $280
LEO 140 STEEM or $39.20
Total in USD $319.20

This is great news. A move in the price of STEEM doubled out holding of both STEEM AND LEO in USD. Thus, we see the exponential power of currency pairing. We still have the same 1000 STEEM and LEO, just the value of both doubled.

The only problem is that, in theory, this will not take place. STEEM and LEO are paired together. Hence, if the value of STEEM doubles, the LEO, which is priced in STEEM, should be cut in half. Looking at it in fiat terms, just because STEEM moved up against the USD, that did not double the value of the LEO platform.

Of course, markets do not operate on theory.

Going a bit further, let us say that the price of STEEM increases 10X over a 6 month period of time. Under this circumstance, and only focusing upon the currency pairing part, we would expect to see some decrease in the price of LEO relative to the USD. Instead of a factor of ten, let us use a factor of 3.

STEEM $1400.00
LEO 46.66 STEEM or $466.60
Total In USD $1,866.60

Notice how there is about a $270 difference between 10X the original situation and what we get here. It shows how returns can be compounded.

Of course, there are many factors that go into a token being price where it is. Over a 6 month period of time, these factors are apt to come into play more than an overnight doubling. This is why it is important to pick solid projects to back that will enhance their value over time through other activities.

Nevertheless, this shows how things can radically change when dealing with pairings, especially with a third currency. The most straight forward way one can see making money is if the STEEM price remain constant and the price of LEO doubled. This is how people often view stocks and other investments.

STEEM $140.00
LEO 280 STEEM or $39.20
Total in USD $179.20

The important factor here is that we make money if any one of the two currencies go up in price in price. We, thus, are increasing out chances of profitability.

Of course, there is the flip side. What happens when things go the other way? Once again, in theory, if the price crashed, the value of the LEO should increase. Real world, we know this does not happen. When massive selloffs occurs, it can stretch to other areas. While it is possible that some of the STEEM is unloaded and moved into LEO, the bulk, in this scenario, would likely go into USD.

A 50% reduction in STEEM might create a 25% reduction in LEO.

STEEM $70.00
LEO 70 STEEM or $4.90
Total in USD $74.90

Here we see the extra step of converting the LEO to USD to enlarge the loss. Cryptocurrency certainly is not for the faint of heart.

All of this is presently a factor because we still live in a fiat world. Ultimately, as marketplaces start to appear, we will be less concerned with the conversion to fiat as we are able to purchase goods and services in crypto. Thus, the STEEM/LEO rate might be the only thing of concern. The price in USD ends of being of no consequence.

As an aside, if we do see the hard economic times that many are predicting due to the overuse of debt, fiat currencies such as the dollar might collapse. This would, again in theory, send the price of STEEM flying. This is where cryptocurrency can be a hedge against what central banks are doing.

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So what does this all mean?

Basically, we are looking at an enormous opportunity. When people are looking at their holdings, the fact that they could receive compounded returns due to the multiple currency situation is very attractive. We are in the early stages with projects just getting going. Therefore, those that are solid with a road map that is being followed will likely offer better returns.

This is not to say everything that is listed will do that. There are a number of SE tokens (as there will be SMTs) that are not worth a grain of sand. The project has no point and is of little use. If that is the case, nothing is going to save it.

However, when looking at some of the more solid projects, we can see an opportunity for some nice increases as compared to the fiat counterpart. A lot of this is going to depend upon liquidity and interest in the project. If the price of STEEM takes off but almost all of the LEO is staked, there will not be a lot of people selling to get back into STEEM. This means the token might remain rather flat against that token.

I like increasing my chances of profitability. The fact I can benefit from the moves of one of two tokens puts me in a better position than just having STEEM. Since we are mired in a long bear market, I feel we are somewhere close to the bottom. At some point, all the development that is taking place is going to reverse the markets. After such a long drop, the greater likelihood, in my opinion, is on the upside.

Go ahead and play with some numbers. If LEO is not your thing, try it with SPORTS. See how things can change as you expand the number of that token. Instead of 1000 LEO, what does the situation look like with 5000 LEO and 1000 STEEM?

Those projects that have tokens on Steem-Engine and, eventually, SMTs, are going to offer enormous potential. The key will be to find the ones that are actually creating something of value. If one is found, it can be a major windfall, especially if one gets in early.

It seems the opportunities being offered are growing at an exponential rate.

None of this is financial advice. This article is for educational purposes only.

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