What should I do with my Steem Dollars and Steem Power? Expanding on donkeypong's article.

So, you have been on Steemit a while and have some Steem Power and some Steem Dollars in your wallet. What are you going to do with it???

This article is an expansion on @donkeypong's excellent artitcle:
https://steemit.com/steemit/@donkeypong/come-for-the-steem-stay-for-the-steem-power-this-is-getting-unfair-for-bitcoin-ethereum-reddit-and-facebook

Steem Power is valuable to the community and to members who hold it. Steem Power powers your posting, commenting and voting. The more you have, the more you earn for yourself and the more you provide to those whose articles you up vote.

But should you get MORE of it now?

What will you do with it, eventually?

Here are some thoughts. Please comment below if you find anything here that is Not Accurate, or if you have other opinions. THANKS!

You have Steem Power and Steem Dollars in your wallet. What are you going to do with it???

If you need money Right Now, you can cash out your Steem Dollars to Bitcoin (Convert Steem Dollars to Steem, then Steem to Bitcoin) and convert that to US Dollars or whatever currency you want.

If you DO NOT need money right now, your main choice is whether to turn your Steem Dollars into Steem Power, by Converting Steem Dollars to Steem then Powering UP the Steem to Steem Power.

Why would you convert Steem Dollars to Steem Power? If you think the price of Steem will be Higher in the future, you want to do this.

First, let's look at keeping your Steem Dollars.
Your Steem Dollars are "only" earning you 10% interest per year, paid monthly I believe. There is very little chance of your Steem Dollars being worth anything other than One US Dollar. The price of Steem would have to drop below $0.05 for the value of Steem Dollars to go down. It is now worth over $3. So, if you want as close to a sure thing as possible here, and if you are worried about the price of Steem going to less than $1 in the next 2 years, Steem Dollars are a better bet for you.

Now, what happens if you convert your Steem Dollars to Steem Power?

First, you will not be able to get at it, to use to pay bills, for a longer period of time. You could  Power Down, and that will get you about 1% of your Steem Power converted to Steem each week, which you can convert to Bitcoin and then the currency of your choice.

If you decide to lock it up this way, because you expect the price of Steem to rise, meaning you will get more payout in the long run, then you have to think about how much it will go up, and when.

@donkeypong's article mentions that

you are not heavily exposed to dilution

but you are  exposed to 10% dilution, which, all other things being the same, will make the value of your Steem Power 10% less per year. Steem is created at a rate that doubles the number of Steem in existance each year. 90% of that new Steem will come back to Steem Power holders, but 10% will not. His article also mentions that

Effectively, you are paid 10% interest for holding

but I don't see how that statement is supported. You do get 10% interest for holding Steem Dollars however.

It looks like Steem will be worth more than $1, maybe much much more than $1 in the future. This is what you hope for, if you hold Steem Power. You expect Steem to be worth more than $1 and you expect it to continue to be worth more than $1 for two years longer than when you expect to Power Down and use the money. If you plan to "retire" in 3 years and use your Steem Power as a 2 year annuity, you expect Steem to be worth more than $1 for the next 5 years.

WHEN should you convert Steem Dollars to Steem Power?
The answer to this question affects the numbers in the last paragraph! Steem is currently worth $3. If you convert your Steem Dollars to Steem Power today, and the price of each Steem Power is equal to the price of Steem, you are hoping that the price of Steem goes UP from here, and is UP when you eventually Power Down.

You may think that the price of Steem has soared a little too high and and a little too fast. Maybe it will come down before it goes up. If you think that, then wait a little and see if you are right, so you can get more Steem Power for your Steem Dollars.

If you think that Steem will be worth more in the future, then waiting for it to come down a little might not be a good choice. It may never go down or be as low as it is today! So get in immediately or miss some of the appreciation.

One other thing to consider. When you Power Down your Steem Power to Steem, I believe the amount of Steem you get each week is based on the average price of Steem that week. I do not know what the conversion rate is, if you are converting Steem Dollars to Steem. If you do this through an exchange, you do it at the current price. But if you internally convert Steem Dollars into Steem, is it at the current rate or averaged over time? If it is averaged over time, then it makes sense to convert now, because since the price of Steem has shot up over the last few days, the average price will be lower than the current price so you immediately gain value!

Thank you for reading this article! Please let me know what you plan to do with YOUR Steem Dollars and Steem Power, in the Comments. If you have written a similar article, please feel free to LINK to it in a comment.

LINKS:

This post started out as a reply to @donkeypong's excellent article, but it became too long for a reply so I made it into this article. Here is @donkeypong's original article. Please red it!
https://steemit.com/steemit/@donkeypong/come-for-the-steem-stay-for-the-steem-power-this-is-getting-unfair-for-bitcoin-ethereum-reddit-and-facebook

Dan's comments   (in the comments of the article I am linking to) about STEEM and STEEM POWER inflationary and deflationary pressures: https://steemit.com/steemit/@maniac/steemit-what-am-i-missing#@dantheman/re-dantheman-re-maniac-steemit-what-am-i-missing-20160713t214911691z

This is where you can see the current and historic price of Steem:
http://coinmarketcap.com/currencies/steem/