STEEM Broke Above $2, but Are We Now in a Bubble!?

Oh STEEM! I must admit I have a love-hate relationship with you. On one hand, you make technical analysts look like absolute geniuses, and certainly, I find zero fault with that! But on the other hand, you make our analyses and research obsolete, sometimes as we are writing them! Can I get an amen???

I shouldn't fault STEEM too much; after all, an accelerated time frame is part and parcel of the cryptocurrency paradigm. As the old adage goes, if you can't handle the heat, stay out of the kitchen. But in this particular rally that the Steemit community is enjoying, we have another problem...a psychological one.

Just yesterday, I reaffirmed that we are heading towards $2 -- my personal gut feeling was by the end of this week. (this is the article -- https://steemit.com/steem/@bullishmoney/this-steem-bonanza-rally-is-just-the-first-strike-a-riveting-technical-analysis-update) Maybe that's bias talking because it gives my post time to marinate. But less than 24 hours later, we are sitting above the $2 mark. Naturally, such a wild transition causes great fear that we're in a bubble.

So...have we gone parabolic? Are we in a bubble?

What Really is a Bubble?

Bubbles are hard to quantify. Generally speaking, the consensus definition on the street is an extreme burst of speculation over a short period of time. To add a bit more science to it, we can just say that a bubble is when price or sentiment metrics hit multiple standard deviations above the mean over an unusually condensed time frame.

Enough of the silly lexicon -- we want to discuss the broader picture. And that is simply that we have yet to see the kind of explosive magnitude that we experienced back near STEEM's "initial public offering," if you will.

Just look at the stats. In July of 2016, STEEM average volume skyrocketed 8,041%, while the STEEM (average) price catapulted to over 780% profits against the prior month of June. No matter how you cut it, that is simply abnormal, even for a cryptocurrency.

Underlying Momentum is VERY Stable!

While the "accusation" of a bubble is extremely understandable -- believe me, I'm in shock myself! -- we have to let rational instruments, such as math or science, be our guide, as opposed to our human emotions. Emotions are wonderful God-given tools, but they can also lead us astray.

Before you make a rash move, consider the STEEM price's average volatility on a weekly basis -- I will abbreviate this as "AVW" for short. Volatility for my purposes simply means the week-over-week percentage gain or loss.

Of course, we humans react to the nominal price surges, but the AVW itself has steadily trended upwards since August 2016. This confirms that investor sentiment is rising on a sustainable basis. This is not some fly-by-night operation.

Now Let's Consider the True Context

My fellow Steemians, context is everything. And this is particularly true of the Steemit currency. While $2 is impressive, it's "only" a 173% gain (as opposed to last year's 780%). Sure, the month-over-month volume return currently stands at a whopping 524%, but that pales in comparison to 8,000%. You don't need to be a math whiz to see that.

So no, I don't think we're in a bubble. Consider that present volume is 28.5 million. That is abso-F-ing-lutely amazing! Plenty of S&P 500 stocks don't receive that kind of trading volume. What I'm saying is that Steemit is going mainstream, so we should expect strong, robust bursts of valuation rallies -- it's just logic, it's just physics.

Now, don't get too comfortable! We should experience a corrective lull to consolidate these incredible gains. But please don't mistake that for a bubble bursting. Like I said yesterday, this STEEM rally is just the first strike.

STEEM On!

Thanks for Reading!

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I'm a financial analyst and a contributor at InvestorPlace and Crush The Street. One of my personal and professional goals is to make Steemit my primary hub for investment ideas and human interest pieces. Together, we can create a platform that truly works for the best interest of the people!

InvestorPlace profile -- http://investorplace.com/author/joshenomoto/#.WSNWddy1uM8
Crush The Street profile -- https://crushthestreet.com/about-joshua-enomoto