STEEM Price Touches Historical Low, Steemit Users Number Increases Dramatically - Why Correlation Is NOT Causation
When I joined Steemit, in October last year, the price of Steem was $0.38. At that time, according to steemd.com, the most important user metrics were looking like this (I don't have historical data, these numbers are from the top of my head):
- active users last 24 hours: 1200
- active users last 7 days: 2500
Now Steem trades at around $0.08. And now, according to the same site, the most important user metrics are looking like this:
- active users last 24 hours: 5800
- active users last 7 days: 9800
This is around 300% increase in about 4 months. If one would try to connect the dots, or to use correlation as causation, will say that the influx of new users is actually dragging the Steem price down. I'm being ironic, obviously, and I'm also drastically exaggerating.
But I do it with a clear intention: measuring the impact of Steemit solely by the price is wrong. And it will be an economical mistake.
The Long Story
Some of the initial Steemit principles were proven wrong by the market. Especially the power down lock time, which was set at 2 years. Hardfork 16, implemented at the beginning of December last year, alleviated some of these mistakes, the most notable modification being the shortening of the power down lock period to only 3 months (or 13 weekly payments).
Some of the initial investors in Steemit felt trapped by the long lockdown. There are many opportunities on the crypto landscape these days and the speculative approach will always try to get in early and get out fast. There's nothing wrong with that, by the way. Speculation has its own role in the big picture.
What may be happening now is that we're seeing this initial speculative capital getting out of Steemit. Obviously, dumping means price down. But, in this specific context, dumping may not mean something intrinsically bad for the platform. Each element of the story should be judged according to its own context. It may be that "weak hands are going out, strong hands are coming in".
Looking at the 300% increase in the number of users may complete the big picture. 300% increase in 3 months is a lot, especially if we look at marketing, which was basically zero. This increase is all organic. And tickling the 10.000 users milestone means there are already a lot of people acting on the platform. Many of them are finding hard to believe that, just 10 months ago, one could cash in $10.000 for a blog post. But they still contribute. They still produce content, they still engage.
Adding to the mix the relative truce on flagging (which was, in my opinion, the number one cause of Steem price going down) and we're looking at something interesting. It may be just a growth pain.
Psychologically, it's hard to look at our Steem wallets and see them losing value day by day.
But that's just how life it is. Sometimes it's good, sometimes it's bad. If it's bad now, it doesn't mean it will continue to be so.
On the contrary. The only thing we know for sure is that the world is always changing.
Yes, I hear you: it may keep changing in the wrong direction and we may see Steem at $0.01.
Ok, so what? If it gets that cheap, then buy a barrel and keep writing.
The worst thing that can happen is that we've all been paid to learn how to create a social media site backed by a cryptocurrency. :)
I'm a serial entrepreneur, blogger and ultrarunner. You can find me mainly on my blog at Dragos Roua where I write about productivity, business, relationships and running. Here on Steemit you may stay updated by following me @dragosroua.
https://steemit.com/~witnesses
I powered up today! If this stuff is still on sale tomorrow, I may power up again!
Having lived through the bitcoin 3 --> 40 --> 4 --> 9 --> then nothing till it did the 1300 --> 200 ....
I really think the product will sell as did bitcoin :)
My thoughts precisely :)
Yes...powering up is the course of action. It is time to buy.
Thank you for encouraging Steemians.
As you say, there are probably early adopters who look to cash out and take profits quickly... it's a pretty normal part of the lifecycle of startups; initial investors who cash out soon after the IPO. Then come the serious long term investors who buy in on weakness with the intent to hold in the long term.
I'm hopeful that's what we're seeing here. Let's face it, projects like twitter and more recently snapchat are years old and still trying to figure out how to make a profit... even though they are huge mulit-billion dollar organizations.
Anyway, I plan to continue here regardless... I like this place!
Totally agree about Twitter and Snapchat struggles. See you around :)
Again, I LOVE your positivism @dragosroua, this is so healthy yet you also happen to be a realist in relation tot he whole situation. This is a very powerful combo for you, but for us all too. Therefore, I wan tot thank you for your words up here which definitely reflect that philosophy. Your last sentence exemplify it to the fullest. Awesome!
All for one an done for all! Namaste :)
Namaste :)
I agree - we shall be positive and see the long term potential - even myself invested yesterday my SBD into Steem - it is a great infrastructure with potential! Price will go up again - not watching this all day out.
]
+1 for positivism.
Thanks mate - positivity is what we all need to show internally and to the outside world - especially if we want to attract new users and steem investors
Hello @dragosroua
You have echoed the very contents of my soul, I am a firm believer of Steemit, and even if the Steem price drops to 0.01 i would still remain here. Facebook took seven years before it started making profit. I also believe that the drop in price of Steem would help weed out unserious people who only want to earn, and not contribute to the growth of the platform.
Great post. Upped and resteemed. I am off to smear @dragosroua all over Social media. People have to see this post.
Thanks for the nice words. It takes time to build something valuable. But it also takes people. They are the number one ingredient in a business. In any business.
Agreed
Problem is that potential cryptoinvestors don't see the growth of Steem. They look only the price, and when it is declining, they assume that project is dying and they don't even think about investing.
So the question is: Why it's so hard to see the potential of Steem? Even our current userbase doesn't mostly get it. I see too often dismissive comments about devs and Steemit Inc.
The truth is that Steem is the most promising cryptoproject at the moment. That's why I believe in it. I want the financial revolution and it won't come if people hang on to cryptocurrencies that lack the technical capability to scale to millions of active users. With Fabric in plan Steem is probably the most ambitious project – and can actually deliver it.
So I guess I have to blame Steemit, Inc, too. They have the best resources for marketing but they have done very little. It's really hard for a newbie to actually understand all the details of Steem quickly. And that is very important if we want to see new developers joining and big money investors coming in.
Skilled developers don't want to waste their time on failing projects. We need to show that Steem has great future ahead and inspire them to join us.
Big money investors won't invest in anything they don't fully understand. We need to rewrite Steem whitepaper and update Steem.io website to help potential investors to really understand what this is about.
I'll write a blog post about this soon.
I am so with you on these comments! I am too amazed by the potential of the technology.
It reminds me of many businesses I see here in Romania: amazing tech potential but almost no business or marketing skills. Maybe that's why I feel so close to this project, lol. :)
I just wrote about this topic: https://steemit.com/steem/@samupaha/marketing-for-steem-let-s-get-to-the-basics
Same here in Finland. Lots of skillful engineers but very little interest in business development and marketing.
In Steem I trust.
Well, I wouldn't go that far, but I like how you think :)
I told you. Cheers.
I wouldn't be too optimistic over that change in price. It's clearly a pump.
The influx of new users does not drive the price down but it is not driving it up either. There is so little demand in percentage term for steem power, my guesstimation from looking at exchanges wallet is that less than 1% of users are buying steem and power it up. This is because steem power is only useful to a few dozen people ( who mostly don't buy steem power), the large majority of users see no utility in steem power.
As long as influence is something difficult to obtain for the majority nobody is going to spend money to buy more of it. Until this is changed the price will stay low because the low utility of steem power puts a limit on the steem price, my guess is that when the price reaches $0.1 again people will stop buying because relative to the utility of steem power 10 cents per steem will be overvalued by the market.. If all the influence was given to the 99% the price will be blowing up right now, everyone would be buying crazy to have more power because they would see the direct result of their power up.
This also puts a limit on the number of users because if users base is growing while price is not then everyone gets paid less until it becomes not worth it anymore for some users.
That's a very good analysis. So what you're saying is that too few people can actually use the SP. Those who can use it are the whales.
What should happen in order for price to climb again would be a broader power distribution amongst all members, right? In your opinion, this is something that can happen very fast, or it will need a certain period of time?
First, the curve should be removed or flatten whatever you wanna call it, it serves no purpose and increases power concentration a lot.
Then if the influence is still out of reach for most users there are many differents solutions that could be implemented.
I'm speculating here but it seems like many in position of power would rather see their steem become worthless than giving up any power which is why any of those proposals have not been considered, most whales mined steem early so if they lose it all they would care a lot less than investors.
Myself as an investor I would give 100% of my power to random minnows and I know many other investors would too because it's the smart thing to do. I would only want to keep downvoting power in case the people I have given my power abuse it.
I am on the same line with you here. I don't even qualify as a dolphin, I guess, and all my SP is made by writing, curating and maintaining a witness node.
I don't think many whales are willing to give away their Steem because it was ninjamined anyway and they won't lose anything. My hunch is that they're just comfortable waiting until the INC makes some moves which will increase the value of their investment again. Sometimes we forget Steemit it's not even one year old.
I'm personally very, very curious to what will happen after HF 17, there are a few changes that may be game changers, especially the arbitrary splitting of rewards.
I see nothing in the roadmap that is addressing this. There will be a flattening of the curve in HF17 which is the only improvement that I see and I personnaly don't think it will have much of an impact on the price.
I said this multiple times but the system is out of touch with the reality, the average joe earns 1000 bucks per month, and steemit expect him to buy $ 100 000 to be a whale on a social media site with 5000 users lol, that means that 99% of users will never be a whale. People should be able to be a whales for much less than that, like 10 times less. This is why a flat curve won't do much.
No, there won't. They took it out. https://github.com/steemit/steem/issues/913
People who have been here for months, working hard, engaging a lot, spending hours and hours, are still not able to give 1 cents with their upvotes, if that doesn't tell you something is not working...
What is INC?
short for Steemit INC. Frequently used in chat :)
Hmm, this one is tricky. I don't see it as a "downhill locked" process. It is fluctuating. The first stage will diminish the average payment, but if enough people are jumping the train, it will also trigger demand, which will increase price. Then another plateau, and so on.
The "traditional" social media giants, Twitter and Facebook, evolved the same way. I can't count how many times I saw "the end of Twitter".
Increase in the number of users doesn't create demand, increase in utility of steem power does.
Increase in number of users will automatically trigger the need for influence (it's intrinsic to any social media platform) and the need for influence will trigger demand for SP.
Just my 2 cents, I may be wrong, obviously.
The influence you are talking about is meaningless to most users. I would argue that users who buy steem power now don't even do it for the influence, they do it because the price is so low and want an investment in this project but their primary motive is not to increase influence.
The influence is not a need, it is similar to upgrades and power ups in games, you can play the game for free but without these extra power options the game sucks.
This is correct, though as ive noted elsewhere, this increase is mostly fictional.
The real problem isn't that the influence is meaningless, its that you can't buy a significant amount of influence for a reasonable amount of money. Part of this is concentration of stake. Part is the amplification of that concentration by n^2.
Look at the biggest whales like @blocktrades or @abit or @freedom. How much would you pay for parity with them? How much do you think the average man on the street would be willing to pay.
Way less than the amount their steem power is worth, even at current ATL prices.
STEEM price will go up again, don't worry!
The worst thing that can happen is that we've all been paid to learn how to create a social media site backed by a cryptocurrency. :)
And markdown, we have learned markdown!
Seriously though, good post and that last bit is so very true
Funny how I adapted so fast to markdown after years of HTML hardcore writing. :)
Same here. At first I wrote my posts in html. Several weeks later when I investigated markdown I realised that this was a much more efficient way of creating posts!
I learned javascript, so i guess i can't complain.
You certainly can't!! ;0)