The TRUTH about how much Steem actually exists. The REAL reason Steem cost $4+
In light of the recent spectacular rally in Steem prices, the more research I seem to do, the more truth I find in the statement;
Steem is REALLY rare!!
How rare you ask, well first of all I think it's important to make a distinction between Steem Power and Steem. Steem power is essentially restricted stock, locked down and untransferable in exchange for a 90% interest rate. Of coarse you can Power Down, but this takes 2 years until your full Steem holding is related to you.
Let's start by looking at exactly how much Steem currently exists.. There is nothing new here, bear with me.
This shows that currently there is about 2.08m Steem in circulation (Current supply v Total Vesting Funds) which equates to around a 2% of Steem and Steem Power, roughly $8m. It get a bit more interesting when you look at the Steem Rich List..
The middle column represents the Steem rich list (UN-vested Steem). Accounts Steem, Steemit2 and Steemit are all controlled by the Steemit team (as far as I am aware, when I've looked at the transaction history, that seems to make sense), and between these account they hold around 730,000 Steem. If we assume that these funds are not going anywhere anytime soon, this would bring the Steem in circulation down further to 1.35m. That being said, it does appear that Steemit1 (another account controlled by the Steemit team, with strong links to the other accounts) has been cashing in some Steem recently, which is good to see there is enough liquidity for them to fund the expansion on this platform.
Overall a 1.3% (rough) free float of Steem does mean that the currently price of Steem cannot be considered real to those of us holding Steem Power. There is a reason that Stock Exchanges around the world demand a free float of 20%+. Market manipulation, and market euphoria can throw price a mile away from true value. This being said, I have been a advocate of this approach (by Steemit @da @ned), and still am, in order to secure the future of Steemit, and prevent a dump from which Steem may not recover (like so many other Cryptocurrencies).
I would advise anyone considering to buy Steem, to work hard on the platform, and earn the Steem in exchange for Creation and Curation of Content. With 14,000 users, a market cap of $340m ($24,300 per user), and a 1.3% free float, it make no sense to trust the current market price.
Steemit is great, and I believe it has a big future ahead of itselfs. I trust @dan and @ned to deliver this. I just want people to stop and consider the value play and the market conditions that are causing Steem to rally so hard at the moment.
I welcome anyone's thoughts...
SteemPower doesn't really earn you any interest, instead you can be rather sure not be be diluted in percentage ownership.
@xeroc Absolutely Correct, I was trying to reduce technical terms. Steem Power locks in dilution at 10% this year (with no contribution to the platform), rather than 100% for Steem by itself (with no contribution to the platform). Correct me if I'm wrong @xeroc
Obviously this illustrates the one of the main differences between the 2 forms of Steem (others being realisable value/liquidity), and that's why one's value doesn't/shouldn't reflect the others value
In the same line of thought...https://steemit.com/steemit/@easteagle13/why-is-the-recent-steemit-hack-will-actually-raise-steem-value-and-make-steemit-more-popular, great job in highlighting the reason why the present exchange rate is sustainable.
Thanks @easteagle13. I am a firm believer of listening and presenting a balanced argument. If I'm ever too sure of myself, I am usually very wrong..
wouldn't it being rare make it more valauble?
I'd compare it to a massive gold discovery. It's in the ground, and it will take 2-3 years to dig out, but it's not in our hands now. But the market would see the future supply is going to swell, and sell gold now to not get caught..
That's Bitcoin.
There's not many comparisons to what's going on under this hood that I can think of.
Bitcoin has a 21 million coin cap, and a deflating inflation rate... Steem runs at 100% inflation per annum into perpetuity..
The comparison would be more correct if I said, They found a gold reserve the size of all gold ever mined...and then found another one the year after...
No that would simply lower the long term cost of gold since its demand would drop to the floor. If they found a comet made of gold tomorrow that could be reasonably and cheaply mined and return back to earth in a reasonable amount of time, the value of gold would start to decline since the supply dramatically increased.
This is neither gold, nor is it a fixed supply side. But the information in all directions is near perfect, and the liquid supply is throttled based on user dynamics. This makes for a far more stable price and much more predictable market dynamics for all.
Basically, whales have a harder time controlling the market.
I'm not going to stand by my Gold example as an eloquent infallible argument. It's certainly not perfect. Mearly representative of an increase in supply and what effect that would have on the price of an asset.
Steem and Steem Power are inextricablly linked, but the Gold thing made sense to me because Steem Power is not liquid 'it's in the ground and needs to be mined to be of value'. I would add to all our banter with, I'm try to simplify aggressively, I want to have a conversation with everyone and help people understand (In the words of Donald Trump) "what the hell is going on".
My replies are explanations not to tell you your wrong. This is what is great about Steem. Civilised discussion
Take a look a Tulip Mania https://en.wikipedia.org/wiki/Tulip_mania
That's not really a coherent or even relevant argument. How can you compare the supply models of a global digital currency with baked in inflation and deflation models to the supply models of a plant that takes months to grow at scale?
If you read below the discussion I had with @jamessmith I wrote;
It's could become a self fulfilling prophesy for sure, the platform become more valuable, payouts become bigger, more users come, and the circle continues. I probably should have been more clear that my 'Opinion' is that people should work for the Steem, not buy it. In many respects, it great for the platform in the short term. Although, could be bad if people lose money (if ever) the price comes off to where I believe true value is now...
You can add as many variables into the model as you like. User numbers are key. I'm an investment professional, and i won't accept anyone who say's at this moment an Opinion that Steem is overvalued doesn't have any kind of legitimacy. $24,000+ per user. This is by no means a model, just some information for people to consider.
$24,000 per user would mean Steem captures user value better than any other platform. This may be because Steem actually pays the true value for what the users are worth while competitors can't do that.
RE: 'Wouldn't it being rare make it more valuable'
My point is; Steem is rare at the moment, but it won't be. It's rarity is currently driven by demand and supply.
Tulip Mania Was driven out of similar economic factors, both demand and supply contributed to it's rarity. It was an example about how short term rarity does not make something highly valuable in the long run..
No, your assumption is that it won't be rare, and I'm not sure what you base this on. Any marked increase in supply will be indicated by a wholesale spike in power-downs taking place, which would be quite easily identified seven days prior to the supply being put on the market.
True, short term rarity can never sustain long term. Fortunately, STEEM has far more fundamentals that lend itself to long term growth and sustainability in both price and user base.
I think we could end up going round in circles here. My point is, Steem is rare NOW, but it won't be. Consider Steem Dollar Payouts are 3.75% (of the 10% Market Cap of rewards per annum, roughly, 75% goes to creator, then split 50:50 Sd and Steem) of market cap per annum. That's currently $17m. And also consider that people will power down. Steem supply will only increase moving forward, and in a big way (relative to current levels of 1.3%).
The inflation rate of steem is peanuts when compared to the demand for steem over time, the price of steem is indefinitely going to rise way faster and higher than any other crypto
Yes but your analysis is based on a static user base, which it most certainly is not.
The only reason we're in an infinite loop is because you don't appear to be accepting externalities into your model, but only the baked in framework to the protocols. One of our assessments will be wrong to some degree, I just don't think Steem will face a problem of inflated supply, particularly not during growth stages.
but the steem power is given out over 2 years of small weekly payments. so it wont be anything sudden.
@traderjeff I more than accept that. your completely correct, and if user number keep increasing the market may be able to absorb the increased selling volume over time. The one caveat to this is that, @1.3%, it doesn't take much powering down or much time to create an imbalance. Essentially, if 25% of accounts powered down tomorrow, within 4 weeks, there would be a 100% increase in potential sell side volume. Hypotheticals I accept
And that is a really, really big if. Furthermore it wouldn't be a surprise because everyone would know it was coming. That's part of the problem in panics. No indicators to explain it.
With Steem Dollars what reason is there to rush to power down? Steem market cap would have to be much higher and there would have to be much more than 14,000 or so users. What would cause the Great Power Down scenario?
I do want to make it clear, I believe in this project, I think it's great and revolutionary. Just think Steem price is too high right now.
Some of us think Steem price is too low. When Steem price goes higher than wouldn't our payouts also go higher? So we should collectively want Steem price higher right?
Good research 🤓 I hope to someday make that list. Cheers!
Your not doing too bad at all @paco. Check where you are on this link, and search for your user name.
https://steemd.com/richlist
try, luck
I told my wife the same thing yesterday about 10k valuation per user.
However you are also buying into a system that might become bigger than Reddit and Bitcoin so I think. Evaluation needs to account for that. 300m is quite small given the potential.
Yep, I can agree with that @knircky. Very good point.
There is more. If we think of ourselves as the first users of Reddit, as well as Reddit employees, and Reddit shareholders, etc, then of course the value per employee is not the same as "value per user". Steem is decentralized so there are no employees of Steem. There are contributes to Steem but anyone can make a plugin or add value in some kind of way.
I don't think it's going to be easy to figure out what the value per user should be but I would expect it would be pretty high in the early stages and we are in the first few months here so this is still the very start of a sort of decentralized company.
@dana-edwards I can certainly agree with your points hear.
so you think Steem is currently greatly over valued? (sorry non technical person here) can't get my head quite round 'free float'
Apologise, Free float is the amount of (in this case) Steem that is actually tradable. So, the market cap is currently made up of 100m Steem, however only 1.3m are tradable, the rest (98.7m) are 'powered up' into Steem Power.
When there is such a small 'free float', value can get very far from reality when there is a large amount of individuals competing to buy a small amount of shares. IF 98% of Steem was tradable, the price would be nowhere near the current $4 price tag. It would be well below a $1. Many people started on this platform 4 weeks ago, have created average content and have Steem Power 'worth' well over $10,000 today...
got it! so there is a chance of people's expectations being upset in the future...? Chances are that this platform get much much more popular in the short to medium term
It's could become a self fulfilling prophesy for sure, the platform become more valuable, payouts become bigger, more users come, and the circle continues. I probably should have been more clear that my 'Opinion' is that people should work for the Steem, not buy it. In many respects, it great for the platform in the short term. Although, could be bad if people lose money (if ever) the price comes off to where I believe true value is now...
Everything can be a simple man that can not only realize
I think it is a brilliant idea that it takes 2 years until your full Steem holding is related to you....because trust is earned over time!!!
I agree, it's protect the platform and creates a committed community. Everyone is incentivised to push the platform froward with great content, and promote the platform to more users...
So to sum it up, steems value is inflated by the demand being greater than the supply? The supply is destined to increase because there is a known, finite amount out there in the form of steem power, just waiting to be converted, but essentially no one to buy it if it is? the future demand is uncertain because the success of the platform is undetermined?
@madillorama in a nut shell, yes. If your looking at your Steem Power balance and think it's worth the same as Steem is currently priced, you need demand to increase at the same rate people power down. Possible...Yes, Worth Contributing to Earn Steem Power...Yes, Buy Steem with Bitcoin...Not for me.
Thanks. A little off topic but you seem to have a solid grasp about whats going on here and prior to joining steem 48 hours agi i didnt know what a cryptocurrency was, I have a question. The content we create creates value for the currency by a)performing a transaction within the block chain, contributing to its "liquidity"
b) generating steem power and reaffirming our commitmentnto the currency over time
Or
C)just giving people a reason to join and enjoy, or to stick around at least, therefore keeping demand up?
Im not even sure I know what I am trying to learn with this question.
@madillorama This is great article by one of the founders @dan (https://steemit.com/steem/@dan/steemit-s-evil-plan-for-cryptocurrency-world-domination) which explains what they are trying to achieve in the long term. In simple terms, think of Steem as a share in a cryptocurrency network.
Steem is the power which keeps everything moving, like national currencies in conventional trade. If you write good content or curate well, you will get rewarded with Steem that are created each day. In the first year, every Steem is diluted 100% (1 Steem is created for every steem that exists), these Steem are given out in rewards on a basis on your contribution to the platform. You contribute more (quantity and quality), you get more.
Long term, Steemit is aiming to become a gateway to a stable cryptocurrency. Because the currency becomes ever more distributed and circulation increases with every individual that signs up, @dan and @ned hope to create the conditions to create the first stable, viable cryptocurrency (if you believe Bitcoin and others are too volatile...).
Early days, but off to a good start
Thats great! And to think I just came here because I thought steemit might just get my unemployed self a free beer. I didnt realize we were trying to change the world! In fact, that gives me an idea.
Thanks so much! Clearer than ever!
Why would you think Bitcoin is likely to go up but Steem is risky? If you're talking fiat then what you say might make sense.
I don't believe I've said that I think Bitcoin is going up. I would certainly state Steem is far riskier though. Risk goes both ways though..
this community is very helfpfully :3 .... someone already feel that .....is that right? :)
Great post for investors!