Should You Convert, Power Up, Sell, or Hold?
This isn't investing advice, it's just a discussion about what I've been trying to learn over the last couple of months to maximize my long term investment in the Steemit ecosystem by increasing my Steem Power.
In the beginning, I just sold all SBD earnings on the internal market right away and powered up the STEEM. Then I started learning more about the SBD as a smart contract, which acts as a debt instrument worth $1 USD worth of STEEM. I did that a couple times, but I also thought about the changing conversion ratio of STEEM to VESTs and how that ratio is only increasing (it's currently at 1M VESTS = 305.074 STEEM). So powering up as soon as possible makes a lot of sense because you're not only getting about ~4% increase in Steem Power right now for your VESTs (as share dilution protection) but buying VESTs now is cheaper than buying them in the future (in terms of STEEM).
At the same time, if SBD are under valued (i.e. below $1 USD), you can get a nice return converting because that lower amount (say, for examle, $0.80) will get you a full $1.00 worth of STEEM (as far as I understand). You just don't know what the price will be since it uses a 1 week median price based on the witness feeds. You also have to wait 7 days for your STEEM, so you're losing out on that ~4% for the week.
My eyes still glaze over a bit when I see total_vesting_fund_steem, total_vesting_shares, steem_per_mvests and such, but I'm learning more each day about how this all works.
To try and better understand this in concrete terms, a week ago I stated a convert on 300 SBD which paid out today:
owner "lukestokes"
requestid 1,471,982,481
amount_in 300.000 SBD
amount_out 318.133 STEEM
That comes to a price per STEEM in USD terms (assuming a $1 SBD) at $0.943
7 Days ago, when I started the conversion, BTC was around $585.
STEEM: Price 0.00197422 BTC = $1.1549187
SBD: 0.00152852 = $0.8941842
Using those numbers, 300 SBD used to buy STEEM 7 days ago would have gotten me 232.272 STEEM
$0.8941842 * 300 = $268.255
$268.255 / $1.1549187 = 232.272 STEEM
318.133 is a lot more than 232.272!
Seems like I did well, right? But what about that share dilution protection I would have enjoyed if I had been powered up for those 7 days?
232.272 * 1.04 (i.e. 4% increase) = 241.563
Yep, still good.
But wait, there's more. The conversion ratio between Steem Power and VESTS is increasing. If you convert STEEM to VEST today you'll get more VESTs then you will in the future. I don't have a lot of data points for this, but based on this rough guess, it looks like the ratio goes up around ~2 Steem Power per day.
7-12: 210.998
8-13: 273.548
8-14: 276.103
8-31: 305.074
So, in a sense, my 318.133 buys me around ~14 Steem Power fewer VESTs, so can pretend I only got 304.133.
So the difference between 304.133 and 241.563 is 62.57 STEEM worth of VESTs when powered up. Not bad! :)
Why did this work out so well? Probably because during the week of my conversion, the price of SBD were mostly below $1 and the price of STEEM dropped quite a bit from $1.1549 down below $.80 at one point.
Could I have lost money if the price of Steem had gone up? Yes, it's quite possible. Then again, timing the markets is next to impossible, which is why I like spreading things out over 7 days. Even then, sometimes you'll win and sometimes you'll lose.
To further complicate things, the SBD also has a 10% return and can be used to promote posts which could equal more returns. That creates an incentive to hold SBD and use it effectively for gaining even more Steem Power in the future.
So, should you Convert, Power Up, Sell or HODL?
I don't really know. I do know that I'm learning a lot and enjoying the ride. :)
My Take away?
Maybe if the price trend is up, and you think that trend will hold for most of the 7 days to come, sell on the market and power up right away. If the price trend is down, the SBD is below $1, and you think that will hold for the next 7 days, go ahead and convert.
That, I think, may be what I attempt to do.
What do you think? Are you trying to maximize your Steem Power for the long term? What techniques are you using to do so?
Its crazy for me to figure out too. For instance, today I spent $22.87 promoting my latest blog post.. I'm sitting at only $8 or so. When it's all said and done, my $22.87 yielded a loss. I will have gained $4 SBD back, and 4 SP / Vests I think.
Yeah, the promotion thing is very interesting. Did you see my Post Promotion Analysis? I'll definitely be running those numbers before I decide to promote a post in the future. I got lucky by getting in early where 15 SBD got me on the front page and the attention of some whales.
Argh, you wrote that post 12 hours ago, and that's when I made my post and did the promotion. I couldn't even get on your post promotion analysis page. Ha ha... I'm changing my name to @unluckyguy
Hahah. It pays to follow my posts closely, what can I say?
(not so humble brag)
:)
FYI you can sell your SBD on the open market instead of waiting a week to convert it to Steem (use the buy/sell option and you can either accept someone's bid or make your own and hope someone takes it for a slightly better price than is available). I personally chose to power up all the SBD I earned immediately because I wanted to reap the benefits of higher reputation score, more curation power, more money given to people for votes, and as you said you get a better bang for your buck on vests by buying them earlier.
If you are worried about steem price fluctuations you could always spread out how much SBD you spend on steem per day. For instance, say you had 210 SBD in your account and wanted to convert it to steem to then power up.
If you sell 30 SBD per day, you end up buying more steem when it's cheap and less steem when it's expensive (because you trade in a fixed amount of SBD but when steem is cheap that buys you more and when it's expensive that buys you less). this averages out the swings and keeps you powering up steadily.
But now there is an added wrinkle: post promotion. I want to allocate some of my SBD towards promoting my posts and some towards powering up to invest in more followers which pay dividends over my future on the site.
It's an interesting question and the answer varies person to person depending on their financial safety net, their belief in the site long term, and how much time they want to commit to steemit in the future.
Thanks for your reply, @daut44. Yes, I was using the internal market almost exclusively when buying STEEM initially. As for spreading out your buys, I wonder how significant would the difference be because, in a sense, you're kind of already doing what the 7 day conversion does for you automatically... but I guess you get the added benefit of holding a bit of SBD over that time period which means you get some of that 10% return on SBD along with powering up smaller amounts earlier which gives you the added benefit of lower Steem Power to VEST conversion and the increasing Steem Power as a VEST holder.
Oh, also, another benefit of the convert function which I failed to mention in my post is it actually destroys the SBD (as far as I understand). If it's sold on the market, that debt still exists on the whole system. Also, don't forget, converting gives you that $1 price of SBD which you don't get on the internal market. As my example here showed, I got an extra 62.57 STEEM worth of VESTs by using convert. That's quite a difference over using the internal market.
First, Luke a another great post, but as I was reading the post and comments, I was still planning to do as I used to do before, hold SBD and by Steem on the internal market when the price is around 1.0 and I was planning to continue to do that way, but I completely forgot about
destroys the SBD, now I'm changing the "game" and will use the conversion(if I predict it will be beneficial) to convert my SBD to steem.Nice. :)
This is true if you convert through the internal market. You can transfer steem dollars to an exchange, sell for Bitcoin, buy steem and transfer back to steemit in a few hours depending on set prices. (There are small fees for exchanging but they are very low). It's be interesting to see if it makes more sense to transfer to an exchange and convert and transfer back and have the ability to power up that same day vs. waiting the week.
Are you aware if when you turn the and to steem on the internal market and wait 7 days if the conversion is just based on the 7 day average?
You can also sell and buy directly in the internal market and skip the 7 day average, but this is speculative and may work out to be profitable if you were able to somehow time the market.
It's best to buy steem when the price is low if you believe it will bounce back up.
It's fascinating to see the different strategies people use in regards to this.
Full stop. I want to make sure people don't get the convert function confused with the internal market where you can buy and sell immediately with no delay without fees.
The white paper says it's a 7 day median price.
Agreed.
Thanks for clarifying that. You are always very helpful @lukestokes
@lukestokes
How about doing everything at different % as the market moves along. This is the best way to invest with maximum optionality and least amout of exposure.
What do you mean by "doing everything at different %"?
@lukestokes
convert some, power up come, sell some and hold some. all in different percentages according to your plan.
Personally, I try to sell SBD at ~$1 or above at Bittrex. I've been doing this since I started. I held it in bitcoin and waited until $1 Steem. I've since reinvested everything Jess and I made into Vests and I am even contemplating breaking out some dusty bitcoin to take it up another notch, if we go below $.70 again.
I'm not wealthy by any stretch, so it would be a bit risky for me to put a handful more of bitcoin into this, but I think I will. I really am confident in what I see happening and I constantly think about how much bigger this can be. Granted, there are things that can be improved, but like Bitcoin, none of these things are impossible. Really, they're not even that hard. We just need the community to realize there's much bigger potential behind Steem than they think.
It's why I'm happy to be talking with Blake, Kieran, and anyone else about all of this in the future. I think that we need hype, we need hope, we need to realize the details are getting in the way of what really matters.
If we work together, and do this right, Steem will be the future for the Internet, there's no doubt in my mind.
I hope you're right. I'm a bit discouraged by the lack of adoption from my friends though. Granted, way more jumped onboard Steemit than got into bitcoin, but still, I'm surprised more people don't see the obviousness of it. Why post on Facebook if you can post somewhere else and get paid? Confuses me why so many stay on Facebook.
I've had similar results with some of my friends. I still have about 6 or 7 really active RL friends on here, who were never into crypto at all before, which I feel real good about.
The way I look at it, Bitcoin wasn't "sticky" early on, and still really isn't for a lot of people. You can hand out a good chunk of bits to people, but they'll do nothing and move on with their lives. That's totally fine. It just means we have to make it better.
We need to build this out from Steemit and take Steem to them. I want to see comment sections in news articles that run on Steem. I want to see the articles themselves have Steem's voting mechanics built in. I want to see it built out everywhere.
Let's take BarStoolSports for example. They may someday join Steemit, say hey, but there is no way they would post content here and stop posting on their platform that they've spent years building up. That's not what we want. If they won't come to us, we need to get Steem on BarStoolSports. We want to be able to upvote their articles, right there, and comment, right there as well. All of that gets pushed back to the Steem blockchain, while looking "normal" on their end. While also showing other, bigger websites a much better solution for their platform.
Steemit would become the signup/login portal for when people want to vote/comment here and elsewhere on the Internet. This is already necessary with Facebook plug-in comments sections. So, let's build Steem plug-in comments sections. It's possible to do. Just takes time, money, talent, etc., but far from impossible.
Steemit is great, don't get me wrong. It can certainly grow and cater to a specific niche of content creators who haven't established their brand elsewhere. Everyone else needs Steem to come to them. If we do that, it's game over.
That's a really great idea. I like it.
(pic from a post I made a while ago)
It'd likely need an additional moderation layer for various reasons that we all may not like, so I'm not 100% sure how that would work. However, I know a lot of other smart people on here that can probably figure it out. :)
On the other hand, their moderators would need enough Steem Power to effectively curate. It may seem like a costly upfront investment, however their costs could be recouped if they opened up their articles to be upvoted as well, drastically marginalizing their risk, while potentially earning them much more money for their content than how they were earning before, simultaneously adding value to the Steem they have vested.
Perhaps it eliminates the viability of ad-based models. Perhaps our reputations go with us to every site we go to. Steem has potential massive implications for both our Internet lives and our real lives unlike any other project I've seen before.
@picokernel showed us how there can be other apps for Steem with Squeek. It's not hard to imagine the bigger picture of what Steem can be after actually seeing another app work in tandem with Steemit.
Might be because all their friends are there, while Steemit is full of "anarchist loonies". :)
Maybe that's why I like it so much. The people I enjoy talking with the most are anarchist loonies. :)
Really good post @lukestokes ! We always learn something. I just hava a small comment, why would you change your SBD to USD and then to Steem to get the 232.272 Steem instead of just converting directly from SBD to Steem in the internal market. Unless the 1.15 price was in the external market and the price in the internal market was higher, lets say 1.28 making it the same to change your SBD directly to Steem.
Sorry, I should have clarified, I didn't actually do that conversion, I just put everything in USD terms so that I could compare apples to apples considering the SBD gives you $1 USD worth of STEEM. Make sense?
This would have been more accurate if I had the internal market values for STEEM and SBD at the time, but I don't have that historical data readily available and, from what I've seen, the arbitrage between the external and internal markets are usually taken care of fairly quickly, so I figured the external market prices for SBD and STEEM would work for what I was trying to do.
Being in cryptos so long I should have picked up on the HODL meme but didn't. Haha, now I know!
For this post, I Googled to figure out where it started because I also heard it for so long and didn't know the original reference.
Priceless.
Thank you for your nice commnent :-) Upvote from me :-)
Thank you, Logic! The world needs more logic and less logical fallacies. Keep spreading the good word!
I personally reinvest 90% or more of ly SBD into Steem. Then I power up.
I recently powered up $600 SBD. I have $300 more coming.
Atthe same time, I am powering down (2% per week) so I can still have a bit of STEEM at the bank if needed (trade or power up).
PU and PD are compatible.
I am now writing a series on startup and curating the French Hidden gems.
I hope I will get followers and will be able to get into a positive virtuous circle (Powering up 90%).
I strongly belive in the future of Steemit and I wish to help others thrive and make this platform more international.
I love that! Long term, that's what's needed. I feel bad for those who are trying to write posts in broken English when instead they could be the leaders in their own region/language. Great work, @sebastien!
Thanks. Appreciated.
Follow me if you like the posts. It will greatly help me !
Followed and voted on your last post.
Well done, sir!
I think you'd get a more accurate idea of the result by looking at how much steem you would have been able to buy at the time your conversion finalized. I can go into it in more detail later, but you want to find out what would have happened if you just waited the send days and then bought steem.
Yeah, I should have included that also. When you have SBD and you want Steem Power, the choices include 1) buy now. 2) buy later. 3) convert. I guess I didn't go into buy now much since that's kind of obvious at the time of posting (just go to the market and put in 300 at the current ask and see what you get). For comparison, that's 243.951 right now.