Chart Of The Day: Is The Steem Inflation The Real Cause…?

in steem •  5 months ago  (edited)

The long-term falling trend of Steem price can have many reasons. One of them is the surprisingly high Steem inflation.

In 2016, at the very beginning, Steem inflation was very high. The number of Steem coins in circulation, the supply jumped to 229,607,487
on the 31st of December from 4,413,860 pieces on the 18th of April 2016. That means it was 52-fold higher at the end of the year than in the first days of inception. The “genesis”.

Measures with temporally effect

But then, measures were taken, and they stabilized the inflation (and also the price) at the end of the year. The blue paper of Steem wrote:

The rate that new tokens are generated was set to 9.5% per year starting in December 2016, and decreases at a rate of 0.01% every 250,000 blocks, or about 0.5% per year. The inflation will continue decreasing at this rate until it reaches 0.95%, after a period of approximately 20.5 years.

But, as you can see on the chart, the inflation stayed only temporally on relatively low levels. It reached ten percent p. a. again in summer 2018, and jumped above 20 percent again in last November. (As price also fell to new lows.) Now, in July, we see a new jump in inflation and a new price fall. Difficult to doubt a correlation, connection between the two.

chart of the day is the steem inflation.jpg
(Click to view in higher resolution.)

For comparison: Bitcoin inflation is approximately by 4 percent p. a., American and European inflation rates, mostly, between 1 and 2 percent in last years.

Not always so bad

Money supply growth is not always causing inflation. If the “demand” for the money is growing with the supply, the price of the money – the value in other currencies, or gold, for example – can remain stable. The problem is when the supply of the currency is growing, and the demand stagnating or surging slower than the supply.

(Update: On the supply side, the inflation is also only one of the main reasons. Overall crypto-sentiment, selling pressure from Steemit Inc., whales or other investors, cost covering from witnesses also can influence the price.)

So, I’m not saying inflation is the only cause of the low Steem prices, but maybe one of the basic, important factors. I will try to figure out the reasons for the high Steem supply growth in the next days. Follow me.

(Steem inflation is not inflation in reality because inflation means prices surging. The data on the chart is more the year/year supply change. The change of the number of Steem coins in circulation. But all are calling it inflation, so do I. I calculated the Steem supply dividing the market capitalization with the price.)

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You are conflating changes in free floating supply (free steem vs SP) and new steem minting (inflation). The value you report is high because of powerdowns and more steem going out from SP. The actual inflation is as inc described.

It doesn't make a difference from the perspective of decreasing steem price, but actual inflation isn't what you describe it to be.

Ah, you disclaimer that at the end. Just because a bunch of people are talking out their asses, doesn't mean you should propagate bad terminology.

I'm going for Stinc selling pressure. Especially because its indiscriminate.
And the mismanagement of blockchain development.

What is the reason for the much higher than 8% inflation we are experiencing? Is it because of the conversions of SBD in Steem?

Posted using Partiko Android

330,000 steem being sold every 7days, that will do it like you say..

Posted using Partiko Android

Only 10 more weeks until the sp is powered down, they will obviously by it all back to be even more cuntish

Posted using Partiko Android

20% is definetely too high, it needs to be reduced back down to single digits.

Selling pressure from whales leaving the platform ? Dan, Ned and other ones from the previous Steem project.
Did someone do some research on these amounts being pushed to the market weekly ?

Posted using Partiko iOS

The reason for the high inflation is the Steem Dollar peg and the 10% haircut rule, which is too high in my opintion. My suggestion is to stop printing SBD and focus more on STEEM.

Where are these numbers coming from? How did you calculate the supply change?

Year/year supply change. Supply data: Coinmarketcap.com, capitalization/price.
(Or, Coinmarketcap historical snapshots with supply - the result is the same.)

Oh, so you are dividing the market cap by the price. Do you know of a more reliable way to figure out the amount of newly-minted STEEM? Data coming directly from the blockchain and not from coinmarketcap.com?

No, I can't read data from the blockchains of 2304 coins currently on Coinmarketcap.com. Can you?

Yeah, you wouldn't be able to read it from Coinmarketcap.com, at least not that I know of. It would require connecting to one of the Steem nodes and making API calls. But I don't know if there are existing API calls that would return information about things like newly-minted STEEM. Other possibilities are database services like https://steemd.com/ and https://steemsql.com/

  ·  5 months ago Reveal Comment

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