STEEM/BTC Fundamental Analysis #1: Why is the price tanking?
We cannot rely on Technical Analysis alone to figure out why the price of Steem keeps dropping.
I have posted my limited TA yesterday (posting time marked as arrow on the chart above).
One thing that seems a bit odd to me is how orderly this downtrend is. In this post we will look at one potential explanation for it.
Supply and Demand
I have been thinking about the major archetypes of $STEEMBTC market participants, and their incentives.
Investors / Early adopters
Generally at this early stage, we should see a positive influx of capital from this group of people. If something bad happens (a hack, bad PR, epic fail of some sort) they could get scared and start dumping.
Content Creators
These people generally do not bring fresh capital to the ecosystem. They create content, and get paid for it. Because many people in this group aren't affluent, and have life obligations and bills to pay, it is expected that they will be cashing out a part of their earnings.
Retail Speculators / Traders
These are the people I usually compete with. Technical Analysis is a very useful tool for playing these crowds, not for TA's sake, but as a second level thinking tool against people who take it too seriously and do things for the wrong reasons.
They generate noise in the markets in the short term, and do amplify the volatility.
For instance, if the "hack" happens, and investors start dumping, traders will want to join in for the ride.
Right now, supply > demand
In other words, we are having a drainage of money out of the network as there are more people taking their money out than investors and newcomers can bring in.
This thesis is further supported by the analysis of Poloniex's wallet.
| Date | STEEM | SBD |
|---|---|---|
| 2016-07-30 | 449,397 | $219,351 |
| 2016-07-29 | 441,597 | $201,749 |
| 2016-07-28 | 418,859 | $191,202 |
| 2016-07-27 | 403,599 | $194,652 |
| 2016-07-26 | 399,453 | $167,597 |
We can see that about 50,000 Steem and $52,000 SBD have been drained from Steemit and deposited into Poloniex in the past 5 days. This is a 12.5% increase in supply of STEEM and a 31% increase in supply of Steem Dollars.
Poloniex is just one of the exchanges, and the patterns are the same on Bittrex as well. I have not investigated other exchanges.
If the fresh coins are introduced to the market, and there aren't enough new investors coming in to buy them up, the downwards selling pressure is created, resulting in lower prices.
Volume
Daily STEEM/BTC trading volume on Poloniex is 670BTC, which is about 83,000 STEEM at current prices. Thus the ratio of fresh coins vs all coins traded today is about 1:9.
We don't know how many of the freshly deposited coins are actually traded.
Quick Analysis of Transactions
It is 9AM in New York as I'm writing this. I have started monitoring the transactions on the blockchain 3 hours ago. So far, 8,000 Steem and $5,000 SBD have been pulled out of Steemit and deposited into Poloniex and Bittrex. See full logs below.
Digging Deeper
There are several questions I have:
- How much of the daily rewards pool is being cashed out?
- How much selling pressure is caused by Powering Down?
- Who is selling?
I am currently working on a tool to analyze all the users and their activities in an attempt to answer these questions. I will be releasing it in the next few days.
3 Hour Blockchain Monitoring Logs:
Withdrawal of 0.100 STEEM from anon.news to bittrex.
Currently we have -0.1 STEEM and 0.0 SBD
Withdrawal of 209.900 STEEM from anon.news to bittrex.
Currently we have -210.0 STEEM and 0.0 SBD
Withdrawal of 116.761 SBD from positive to bittrex.
Currently we have -210.0 STEEM and -116.8 SBD
Deposit of 0.340 STEEM from poloniex to n1ck988
Currently we have -209.7 STEEM and -116.8 SBD
Withdrawal of 200.279 SBD from beanz to bittrex.
Currently we have -209.7 STEEM and -317.0 SBD
Withdrawal of 26.682 SBD from nathanjones to poloniex.
Currently we have -209.7 STEEM and -343.7 SBD
Withdrawal of 163.369 SBD from seagul to poloniex.
Currently we have -209.7 STEEM and -507.1 SBD
Withdrawal of 363.000 SBD from linouxis9 to poloniex.
Currently we have -209.7 STEEM and -870.1 SBD
Withdrawal of 1.481 STEEM from seagul to poloniex.
Currently we have -211.1 STEEM and -870.1 SBD
Deposit of 89.990 STEEM from poloniex to elyaque
Currently we have -121.2 STEEM and -870.1 SBD
Withdrawal of 2000.000 SBD from steemychicken1 to bittrex.
Currently we have -121.2 STEEM and -2870.1 SBD
Deposit of 200.260 SBD from bittrex to beanz
Currently we have -121.2 STEEM and -2669.8 SBD
Withdrawal of 499.990 STEEM from bittrex to poloniex.
Deposit of 499.990 STEEM from bittrex to poloniex
Currently we have -121.2 STEEM and -2669.8 SBD
Deposit of 272.500 STEEM from poloniex to bulkygangsta
Currently we have 151.3 STEEM and -2669.8 SBD
Withdrawal of 499.990 STEEM from bittrex to poloniex.
Deposit of 499.990 STEEM from bittrex to poloniex
Currently we have 151.3 STEEM and -2669.8 SBD
Deposit of 199.990 STEEM from bittrex to ramta
Currently we have 351.3 STEEM and -2669.8 SBD
Withdrawal of 499.990 STEEM from bittrex to poloniex.
Deposit of 499.990 STEEM from bittrex to poloniex
Currently we have 351.3 STEEM and -2669.8 SBD
Deposit of 0.990 STEEM from bittrex to langoza
Currently we have 352.3 STEEM and -2669.8 SBD
Deposit of 465.990 STEEM from bittrex to langoza
Currently we have 818.3 STEEM and -2669.8 SBD
Withdrawal of 499.990 STEEM from bittrex to poloniex.
Deposit of 499.990 STEEM from bittrex to poloniex
Currently we have 818.3 STEEM and -2669.8 SBD
Withdrawal of 1700.675 STEEM from steemit200 to poloniex.
Currently we have -882.4 STEEM and -2669.8 SBD
Withdrawal of 1802.262 STEEM from steemit200 to bittrex.
Currently we have -2684.6 STEEM and -2669.8 SBD
Deposit of 1.893 STEEM from bittrex to blocho
Currently we have -2682.7 STEEM and -2669.8 SBD
Deposit of 79.990 STEEM from bittrex to blocho
Currently we have -2602.7 STEEM and -2669.8 SBD
Deposit of 179.990 STEEM from bittrex to ramta
Currently we have -2422.7 STEEM and -2669.8 SBD
Withdrawal of 1922.520 SBD from bittrex to poloniex.
Deposit of 1922.520 SBD from bittrex to poloniex
Currently we have -2422.7 STEEM and -2669.8 SBD
Withdrawal of 1.000 SBD from steemychicken1 to poloniex.
Currently we have -2422.7 STEEM and -2670.8 SBD
Withdrawal of 499.990 STEEM from bittrex to poloniex.
Deposit of 499.990 STEEM from bittrex to poloniex
Currently we have -2422.7 STEEM and -2670.8 SBD
Withdrawal of 33.246 STEEM from scrawl to poloniex.
Currently we have -2456.0 STEEM and -2670.8 SBD
Deposit of 424.164 STEEM from poloniex to somebody
Currently we have -2031.8 STEEM and -2670.8 SBD
Withdrawal of 12.000 SBD from kalimor to poloniex.
Currently we have -2031.8 STEEM and -2682.8 SBD
Withdrawal of 39.101 STEEM from bittrex to poloniex.
Deposit of 39.101 STEEM from bittrex to poloniex
Currently we have -2031.8 STEEM and -2682.8 SBD
Withdrawal of 5000.000 STEEM from smooth-d to bittrex.
Currently we have -7031.8 STEEM and -2682.8 SBD
Withdrawal of 20.000 SBD from kalimor to poloniex.
Currently we have -7031.8 STEEM and -2702.8 SBD
Withdrawal of 1795.000 SBD from steemychicken1 to bittrex.
Currently we have -7031.8 STEEM and -4497.8 SBD
Withdrawal of 1000.000 STEEM from enki to poloniex.
Currently we have -8031.8 STEEM and -4497.8 SBD
Withdrawal of 488.100 SBD from klye to poloniex.
Currently we have -8031.8 STEEM and -4985.9 SBD
I am not your financial advisor and this post is not an investment or trading advice. The above post merely represents my opinions, which could be factually wrong. Please conduct your own due diligence before investing.
steb by step, we are staying at the beginning..
Far from it. We are still 1,000%+ higher than we were a month ago.
I wish to reply using picture from another steemit article
With steemit we are somewhere between Peak of inflated Expectations and Trough of Disillusionment. So, downing-trend will go on. Such is my quick analysis)
Maybe, but I think the entire crypto space is just now hitting its stride on the journey upwards to the peak of inflated expectations. Bitcoin was the innovation trigger. As much potential as this technology has, the peak of inflated expectations should rival or possibly even dwarf the 2000 nasdaq bubble.
As for amount of people involved or know exactly what is crypto - seems You are right. And as for perspectives every libertarian was waiting from crypto-technologies (censorship absense, anonimity, decentralization and so on) - it is on the way to Trough of Disillusionment.
Although short-term predictions aren't my thing, I believe that at some point, perhaps near 0.003, we'll hit a temporary equilibrium of stability.
Wow, excellent analysis
thanks for your useful post! I'm looking forward to your next!
A++ Info there will be new market capital capitulation will slow soon :)
I agree with most of your article. Only one thing I have w question about. If people are selling off their steem, why doesn't it raise the price? In theory there would be less steem with same amount of demand, so shouldn't it be worth more?
Steem cannot be destroyed, only transferred. I suppose the question you want to ask is, what happens when sellers get exhausted (there are no more people willing to sell)? Thats when TA kicks in, we are looking for a trend reversal in that case.
So the trend reversal in this case would drive up the price correct?
Yes.
I think the hack and consequent technical issues put a bit of a damper on the price movements, but in the long run the hack and everything that came with it will be good for STEEM since it heightened the focus on security and allowed Steemit to put into place a lot of good security measures.
Good work though, looking forward to seeing the results of the rest of your digging.
The new RNG based passwords are an excellent solution against bruteforcing attacks, however to completely protect the less savvy users, the owner keys should get their own RNG password at registration. Then again, if the user stores the password in the browser or in plaintext, its wasted effort. Either way, I agree, the security has been hardened quite a bit.
Considering that the price was at 20c a month ago, we are still holding up pretty good. This cool-off period is a healthy time for the market to consolidate, and a good opportunity for new investors to chip in. As soon as a new marketing/influence channel opens up and adoption skyrockets again, we will see another rally.
During the first year steem is rapidly being created, so its understandable that due to the influx of a ton of steem the price would adjust downward.
I see this situation as spring. We stretched spring and see how it compress. It is normal. It is not necessary consider the situation in details, only if you want understand all processes. There are more simple methods for estimation of growth.
Not yet, but give it some time. More users equals more content. More content equals more traffic. More traffic equals more options for making money, both for Steemit (advertising) and Steem (buying ads via Steem/SBD etc) :-)