Why Catching A Falling Knife With STEEM Is A Good Thing

There is a saying in the world of investing that it is never a good idea to try and "catch falling knives". What this means is that it is best to buy after the price bottomed and started to work it's way back. Often this entails buying after a certain resistance level is passed to confirm the reversal.

Just because an asset dropped X% does not mean that is cannot drop more. Often, things look cheap compared to where they were yet still can go further. It is often tempting to buy down as prices decrease, aka as dollar cost averaging. This can be a good thing in the long run but it is often better to wait for it to bottom out and then start the averaging as prices start to move up.

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Mind you, none of this is investment advice; instead it is provided for educational and informational purposes.

All this aside, I bought STEEM yesterday at $.40. This means in the past few weeks I bought at $.83, $.59, and $.40. The price keeps heading down meaning that I am prepared to buy at $.30, $.20, and $.10.

In other words, when it comes to STEEM, I am catching falling knives and proud of it.

There are a couple other cryptocurrencies that I am looking at, but have not bought them. I will not catch a falling knife on either of them. On those, I will wait until the market bottoms out and shows a confirmation on a reversal.

So why did I ignore the advice I just posted and buy STEEM on the way down?

I will answer this by an example.

If I buy Bitcoin at $6.000 and it goes down to $4,500, I am down $1,500. There is nothing I can do with that Bitcoin other than sell it at a loss, hold it, or buy more to average down. The only way I will get anything back is for the price to return to the previous level of purchase. Even as a long term hodler, this could be a while (especially if the purchase price was in January at $18K or so).

STEEM is a totally different animal. Let us say we purchase at $1.00 buying 1K. If the price goes down to $.50, we are in the hole $500. Or are we?

The key to STEEM is what we do with it after it is purchased. STEEM offers a lot more options as opposed to Bitcoin which is basically a buy and hodl. With STEEM, we can power up which allows us to earn more STEEM by partaking in the inflation rate payout. Powering up also increases our voting power which means the return we get on the platform for our activity will increase whether it be curation or self voting posts. Either way, we will see a return that somewhat offsets the pricing move.

By powering up, we increase our standing on the Steem blockchain. This can assist us in getting followers which could mean more upvotes. It is also a way to show our commitment to the blockchain, something that could attract the attention of a larger account, hence providing some bigger support.

Finally, and perhaps most importantly, powering up enables us to delegate the SP. With the SMT protocol being worked upon, we see a number of coins that are already being issued in return for delegation. For example, we could take 200SP and delegate it to @dlike which would net us more than 2,000 of that token per week. In addition to @steemhunt, @actifit, and a host of other applications, I expect this concept to expand as more projects are announced.

The point is that STEEM offers a usable asset on the Steem blockchain. The price of it in fiat matters none when operating daily on here. Looking at the reward pool for the next week, there is still over 800K STEEM available., similar to what it was before the price drop.

This is a fact that cannot be overlooked. If we are looking to sell STEEM, then the price in fiat matters. However, if one is purchasing STEEM to operate on the blockchain, a lower price means more to power up for the same amount of fiat.

It is often mentioned how there is a distribution problem with STEEM. This is ideal situation for smaller accounts to power up. I know I am not the only one taking advantage of the lower prices.

Actually, the price drop is a GOOD thing for the Steem blockchain for two reasons:

• Allows smaller accounts to increase their standing for very little fiat
• Enables more of the STEEM on the open markets to be removed and powered up, thus reducing the float out there that can be bought.

According to steemd.com, there is roughly $83M STEEM on the open market.

I have not checked the powering down stats but I cannot imagine too many people are selling at these levels. This is the time to buy. Therefore, we could see a larger percentage of the total amount of STEEM locked up as SP.

Let me ask another question: What do you think happens to that 83M outstanding STEEM if the price gets down to 10 cents? Do you think there will be a ton of Steemians powering down? Even if you do not believe in this platform, what is the point then? One might as well hold for a rebound.

I surmise that, at those levels, millions of STEEM would end up in SP. Think about it. 5M STEEM could be taking off the market for $500K. That is only 1K people putting up $500 apiece.

Now, I am not saying that STEEM will get down that low or, even, where it will go from here. The point is that those who are long-term believers in Steem are getting a great bargain with the ability to enhance one's individual standing plus strengthen the ecosystem altogether.

STEEM is not like the other cryptocurrencies that are getting slaughtered. There is value on the blockchain to having STEEM. Even when we are hodlers of STEEM in our account as SP, we are doing something with it.

It is something we use on a daily basis since it affects everything we do on this blockchain.

Thus, I will not chase other cryptocurrencies down but have no problem adding to my STEEM position as the price falls. Having more SP is always an advantage.

Most of us never thought we would see prices like this again. The FUD is operating in a big way so let us all take advantage of it. If you believe in the long-term prospects of this blockchain, now is a great time to increase your standing on here if you have the ability.

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If you found this article informative, please give it an upvote and resteem.

Again, none of this is financial advice, simply an article stating what I am doing and providing some educational insight.