Why Steem price is rocketing but volume is low

in steem •  3 years ago 

If you have been looking at price charts today you might wonder how Steem has been able to grow it's market cap so much with so low volume.

Explanation is simple: There are not that much liquid steems.

You can check the current percentage of liquid steems easily.

  1. Go to steemd.com
  2. Look values for current_supply, total_reward_fund_steem and total_vesting_fund_steem
  3. Calculate amount: current_supply - total_reward_fund_steem - total_vesting_fund_steem = liquid steems
  4. Calculate percentage: liquid steems / current_supply * 100 = liquid steems %

Right now, as I'm writing this, there are 468,534 liquid steems which is 0.84 % of all steems.

So you can probably understand now why it's easy for price to go high if there is even a little bit more demand. Steems are really scarce resource because most of them are locked in reward fund and in vesting fund (aka Steem Power).

Bittrex orderbook has currently less than 14,000 steems in asks.

What if a whale comes and wants to get a big stake in Steem? Well, that's not possible without the price skyrocketing. Even if the whale could buy all liquid steems with current market price that wouldn't be a big sum – only about 770 bitcoins as I'm writing this.

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Whales can contact steemit for off-the-market trades

How big is a 'whale'? Because 15k STEEM just crashed the price. Crazy.

Yeah, orderbook is pretty thin in bids, too.

But still it's very limited amount that whales can buy. Power down limitations are same for Steemit as they are for everybody else.

It will be interesting to see how this plays out. How many of you are more willing to hold because you know everyone else is too? How many of you have more faith in this community because you know people cannot "run to the exits" and leave everyone else holding the bag?

Volume is low and much of it gets converted into Steem Power. Soon with Steem Dollars and liquidity rewards we should see some interesting trends with volume and market depth on the internal exchange.

It's going to be a fascinating dynamic for sure. A few years from now, will business schools and sociologists be studying what's being done here now? When Steem Dollars are released and payouts start, it will lead to some cashouts. But with this momentum and more content and power ups coming in every day, seems like a safe bet that the vast majority will power up even after July 4. There will be some volatility in July. Once the market finds its balance point, though, I have to believe we'll continue seeing the type of steady growth we are seeing now. Reddit has something like 40 million users, right? Do they get paid? This thing could grow steadily for years.

Why doesn't Steem have a referral mechanism similar to Bitshares 2.0? I think the referral program was a great idea but implemented for the wrong thing because exchanges expect people to have money. If the referral program is for content producers you could grow Steem pretty dang fast and viral.

I'd like that, too. But as I understand it, anything like this they implement might have to come from the founders' stakes or some software layer, since the main code is already baked in. Another way to look at Steemit, though, is that the whole thing already is a giant referral reward mechanism. If you have lots of Steem today, your money is worth more because the price is increasing. If you have a blog post that's good, you can promote it on the Internet and get paid for anyone who comes in and upvotes it. If you want to tell others about the moneymaking opportunity of posting or voting, get them here and they will thank you with upvotes. Even if those aren't going to you directly, every new person is adding and curating content + maybe bringing in money, hopefully power ups. So it is kind of a referral system already is you believe that we all benefit from growth.

EDIT: It seems they may be considering some incentives for referral signups after July 4. We will see...

Trying to figure out the economic scheme of Steem is difficult because there are a lot of moving parts. It seems to have potential because of the viral element and it looks like the perfect vehicle to achieve mainstream adoption. You say there is an incentive to vote and curate but why would you want to bring in new people if it dilutes the very limited jackpot of rewards to be distributed?

You do want to bring in people but you mainly want to bring in Steem Power am I right? So from what I understand Steem looks "underpriced" from a speculator perspective but then you do not want to hold Steem without powering up because holding Steem is like playing hot potato?

What economic strategy would you suggest? Are you going to be buying Steem in order to vest it for years?

@dan -- why can't I answer dana-edwards? (Next comment over). Can we have more than 6 comments deep and be able to comment more than once per minute? What if I were responding to my fan base? I'd need rapid fire posting.

@dana-edwards the more people that come to steem, the more specualtion there is and the higher the market cap of STEEM goes, so we all win :) see coinmarketcap.com

@bobsunday if you want to post more frequently, you need more Steem Power.

Better to see once :-)

STEEM chart

#STEEM #price #chart

Do you see this trend continuing past the 140 day mark? Once all the "free steems" from steemit start hitting the market there is going to be a flood. The only way to keep the price up will be if we can on-board enough people to make sure that as all of those are hitting the market, there are enough new users to be able to take them on.

Free steems that Steemit is giving away are in the form of Steem Power. So it will take a long time if users want to convert them fully back to steems and sell. It will be a slow flow instead of a flood.

Accounts created using steem also have to increase their SP by 10X to be able to withdraw, so they basically have to earn withdraws with good posts.