Excess Supply : Killer of Steem , EOS, Bitshares and other top crypto currencies ?
It is true that Steem , EOS and Bitshares are among the best crypto currencies due to the value that the coins have , the communities and team behind them. However will excess supply be their demise?
For those of us that are conversant with the economics of demand and supply, it is argued that if supply surpasses demand then the price falls and vice versa-hence why the precious stone (Gold and diamond), crude oil and even equity industries systematically control supply in order to better control price. Crypto-currencies, on the other hand, are not immune to failure if the team goes against the principles of economics.
Moreover, many investors have lost money concentrating only on market cap of a coin without looking at the big picture: future value, team behind the project, circulating supply and importantly, total supply.
According to coinmarket cap - See for yourself here on coinmarket cap some great coins have not seen their periods due to excessive circulating and total supply even though they are excellent projects with amazing team.
Zach Herbert argued that :
There are two major inputs to market cap: total supply, which is required to properly calculate present market cap, and inflation, which can be used to predict future total supply and therefore future market cap .
Total Supply:
Every site we could find that lists out tokens by price, volume and market cap does so based on circulating supply rather than total supply. Circulating supply indicates how many coins are in circulation, but does not include coins held by the project. By contrast, total supply includes coins in circulation + coins held by the project.
Read full article here .
This argument is valid with this simple example: If Lamborghini produces few cars of its new model ( Lamborghini Veneno -see pic ) , price will be very expensive because many rich people will want to buy (demand surpasses supply). On the other hand , how many people will be proud driving the most common car in his / her country with excessive supply?
Why Steem will succeed : steemit
I will remiss if I say that am not passionate about steem and its ecosystem. Moreover, in reality , steem ecosystem is the best compared to other crypto currencies :
- Superior blockchain: steem processes transactions faster and more efficient than bitcoin and Etherium combined which shows its superiority and thus solid future value.
- Community growth: we all know that social media platform can grow into 1Billoin + members as the case of Facebook. In reality, it pays more to be a member of steemit than any other social media due to the great community , quality contents and reward system-read more here on my former blog . Therefore , in few years’ time steemit will be huge when it enters mainstream (especially if just one big world celebrity signs up on steemit and make positive noise about it ) and thus will reflect in very high steem price ( now is the time to buy more steem and power up).
What do you guys think?
- The points raised here are great, however I will add more
- I agree with the points raised here and thus, will always look at the big picture
- I disagree with demand and supply economics
- Shut up @charles1, you are talking nonsense again.. steem price will never go up
Send in your comment, Please resteem this for others to join and up vote to send your support.
See my former blog post on Why many people will fail on Steemit and other social media
For those who want to be an investor in Bitcoin wallet : lend bitcoin via paypal- see X coins link: https://xcoins.io/investors?r=v93e2z
I think each of the three you mention have different circumstances:
steem: Inflation is relatively high at 9.5%. But each year it is scheduled to decrease, with tale emission at 1%. So I don't think we can conclude too about 'too much supply'. Zcash for example has very high inflation but it's still been trending up. Moreover, steem absolutely needs some inflation (unlike bitcoin), for the payouts! The difficult question is what rate is best. But if steemit grows big I think there would surely be ways to generate profit too, even if that eventually means advertising. Facebook is free to use, but still generates great profits...because it can do this one way or another due to its network effect. Only difference with steem is that a high proportion of the payout goes directly to the content creators (which is the great innovation!) Anyway, I think it can sustain the inflation model easily provided it can accelerate its network effect (number of active users).
bitshares. Great tech., but I hold very little now (I used to hold a lot). Reason is that the shareholder gets very little / nothing out of holding. This could easily be fixed, but problem is that the original developer left and also due to the voting system. Not sure it can be fixed easily once the stakeholding proportions get stuck, and the devs have sold most of their stake to pay for development....this is why POW has advantages of POS in this regard. Logical thing for devs to do is leave and start a new project as @dan did (haha..). The way the issue could have been fixed would have been continued development and having tech where BTS holders get a share of the revenue....look at Lisk, Waves, Dash, Nem for examples where it pays to hold the tokens.
eos: this is a special case currently due to the ico schedule. This will constantly act as 'damping force' on price until we get nearer the end of the crowd sale period. When we do get nearer the end, I think the price could rocket up, if the tech can deliver what it promises. And unlike bitshares, there should be great value in holding the tokens as it should real value, because dapps will require it to get keep their smart contracts running.
An excellent response from you, thanks for sending in your thoughts hence why I missed your posts with its constructive analysis 😂😂😂😂😂 . Without going into the details, my point was to outline why and how too much supply can negetively affect price , as you can see these coins prices whould be higher than their current prices if there is a bit less supply, however I agree with your analysis and I am sure that prices will increase with time due to the quaities of the platforms. Hope you like the Lamborghini Veneno ... lets hope for 1K steem price by 2 years time and you get one ..hahaa
Hehe, thanks.
But for that, steemit would really need to figure out a way to onboard users more quickly and I guess require less delegated stake (or they'll probably run out..) Because there's a close relationship in social networks between numbers of users and market cap....ballpark $100 per user for Facebook etc. And actually, in this regard steemit is currently way over-valued 😯
Anyway, crypto is crazy...many cryptos have valuations in millions even if there's no rational value proposition!
A different way is to compare to other cryptocurrency market caps. In this regard I think steem is very undervalued, although the low trading volume is a negative in this regard.
Anyway, I think a 10x increase in valuation would not be out of the question based on this. And I would be very happy with this😂
Good point I agree with your analysis 😂 . However as indicated, if steemit picks up and reaches mainstream with millions of users, say in 3 to 5 year time it will surely be a household name and there is nothing that will hold steem price to 100 even 1K USD -however as indicated in my last post, there are still work to be done by all. I never underestimate the power of crowd (Face book et al for example) and yes , there should be strategic advertisement here in order to get external revenue-this will change the playing field in our favors isnit it ?
I'm not a fan of advertising and actually would not like steemit so much! I was thinking more that once they can't grow user numbers any more, they might have to consider it...haha, long way off😂
But the great thing about steem is it is decentralised. It's entirely up to steemit how they want to run their website; similarly 'esteem', or any other enterprise that wishes to leverage the steem blockchain as part of its functionality😀
Edit: I would not mind a banner advert too much, but would really get put off with a you-tube wait 3 seconds before you can view anything! Lol ;)
Good point,haha however tell Facebook or google that you do not like adds haha. If steemit will implement adds, then the platform should do it prudently...maybe allowing top firms to get account and advertise their products via those who follow them and in trending pages and tags after paying high price. All firms need huge external revenue for viability especially social media platforms-I think that it will be great for steemit , however it should be done prudently and members who have
steem power will get millions in revenue hiyaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa😀😂
With that conviction, you should buy some/more!😜😄
😀😂 absolutely, gradually and steady!!!! I am chasing you hiyaaaaaaaaaaaaaaaaa
I agree that the decentralized aspect is one of the most important factors. I do not have any long term confidence in centralized cryptos even if they are currently doing well.
I am sure that there will be a lot of centralized cryptos especially once the global elite get more involved in this budding economy...
hhahahha so true "crypto is crazy"
Doesn't matter how smart you are or what the situation looks like now, as you said CRYPTO IS CRAZY and can change in a poof.
Its an exciting, potentially very lucrative and also dangerous game!
Great comments as usual @xaero1
That was an excellent comment,@xaero1, You have nailed it.
And thanks to @charles1 too for bringing up the subject.
I have upvoted and followed both of you.
I would like to add some comments:
1- The price of steem is particularly important. Higher prices mean higher value for payouts and hence higher attraction to talented content creators. So, the thriving of the platform itself depends on the value of steem. Other projects would not be affected that much by the price of their tokens. So, we (steemians) must care about the price of steem.
2- The amount of supply by itself is not important. What is important is supply compared to demand. Now, what would create demand for steem? This the subject that we (the community and the team) need to consider and pay attention to.
3- I am a little bit alarmed by the way @dan is abandoning a project after the other, leaving them incomplete. I believe that it would be better to complete your work in a project before you go to the next one. IMO, both Steem and Bitshares had much higher potentials if they received the needed nurturing from their parents.
In fact, these worries are what is stopping me from investing in EOS. I am afraid that he would leave the project before it matures.
Finally, a question to @xaero1: You mentioned in your profile that you are SP investor. Can you please tell me how do you invest?
Thanks for your reply. Great comment!
I'm not an investor in the true sense, because that would probably mean in an actual company like steemit! All I mean is don't trade it, I.e., and in fact it isn't possible to trade if you are powered up!
Really I mean that I mostly trade crypto currency like BTC , ETH, as my work! To try to make money :) However, steem power is the main holding I have which I can't trade, hence I view it as an investment! I'll be holding it whether the price goes up or down (even to zero ;) )....so, either I get a nice capital appreciation if the project is successful, or I go down with the ship, if it sinks!😂This is what I mean by 'investor' as opposed to trader😀
Yes, I get it now. But, why do you choose to do that? You must think that the odds of success are much more than the odds of failure.
Exactly... I think the platform is pretty unique, and could be a good investment. But it requires continued growth in user numbers. Will be interesting to see if it works out!
Its people like you that will make this community successful. If we had more investors like you Steemit would be FAR more successful. I hope you inspire others to commit and contribute such as your self!
SteemON!
Thanks!😃
In addtion to my last comment , am impressed on your great posts and comments hence why I referenced you in my latest post -check it out and more success bud
Hmmm I think that your latest profile photo will scare the shit out of them F4F and pls upvote ladies due to its red background !!!! what was your motivation?hahaa
That interesting post @charles1
upvote and follow you now :) , nice to meet you
The creator of these 3 projects is Dan Larimer. I see nothing but success on all of these projects. EOS alone raised 300 Mil on its ICO, it has been the highest ICO to date.
True on EOS, but @dan did leave bitshares, and he's mostly left steemit too - if I understand correctly!
Good point, I agree. However only one man does not create a great company...rather the invisible teams behind the project.
I was going to ask the author why he didn't give us thoughts on EOS, ......but you did. Look I am not no rocket scientist but everything I have read about EOS, from their VC"s, to the amount of ethereum EOS project developers hold and their developers (The developer of steem). It all makes sense! I have no doubt their technology will work, It worked for Steemit, why doubt Dan now? I will be more shocked if the technology didn't work. To me EOS is a no brainer even for the novice of cryptocurrency enthusiasts. The price should and will skyrocket for EOS! That's A Gurantee!!!!!!
Upvoted and RESTEEMED :)
Thanks a lot, more success.
Great point raised here..its a truism that if demand surpasses supply...then its positive...as price is high...but if supply is more than demand...it will affect the market... For steem...it has great positive trajectory... Thanks once more for this great post
Welcome and thanks for your response.
Welcome & keep it up
same here
Ok
Unlike with Lamborghinis, the number of units of a cryptocurrency does not matter because:
a) a token doesn't cost anything to create
b) tokens are infinitely divisible
If Steem had started with half as many tokens as it did, each token would be worth twice as much, but the market cap would be the same.
So, no, the supply of tokens is not holding it back. The only thing that could ever boost the value of cryptocurrencies is increased demand, because supply is effectively infinite.
Good point however see bitcoin and other coins with limited supply and check the price of their coins. All are in coinmarket cap for you to analyse and see those with huge circulation supply and check their prices..it actually do affect price when there is way too much supply of anything. However your point is vaild, thanks for your comment
Yeah, I forgot to factor inflation, which is "excess supply". That is indeed a price killer. That's why I generally prefer crypto with fixed supply.
Good point hence the high costs of bitcoin , dash, etherium , neo , Litecoin etc before writing this article i took out time and researched coinmarket cap and note that even better coins Like Bitshares, Ripple , IOTA, NEM have low price due to excessive supply...supply is indeed a bg factor
What makes you think the price is too low? The price is the price. Nobody knows what it's supposed to be, isn't it?
Good point however I even like the low price now in order to be able to buy more ...price will always rise hopefuly next year
I agree. I'm in it to win it.
Good point bud, thank goodnes it is stilll cheap....let gradually get steem before it goes crazy up!!!!
@blueorgy do you agree with the concept of demand and supply as indicted in this article? what is your take on it
Hi @charles1, I see you have mentioned me.
This is automatic response so that I may respond to your mention later.
welcome, always.
Thanks @banjo
Meaningless piece. Of the three chains only steemit will continue to inflate.
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Thanks bot
steem will be top cryptocurrency of future surpassing bitcoin and Ether
Its possible, thanks for your comment
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