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RE: This Might Be Obvious To Some, But It Wasn't To Me - How Powering Down Can Actually Increase Your STEEM Power Over Time
So let me get this straight: you're simply going STEEM -> SMD (internal), then SMD -> STEEM (internal)? How does this earn you money? It seems like you'd simply lose the bid/ask spread each time. Or is your SMD -> STEEM conversion done through the 1-week delay? If so, how do you guarantee yourself any profits without making assumptions about the STEEM price over the next week?
Or, it's possible that I'm not understanding something crucial. Like, maybe I'm picturing the 1-week conversion happening through the internal exchange, but really it simply destroys the SMD and prints you new STEEM in exchange. Even then, it seems like you'd be risking an unfavorable exchange rate at the moment of conversion.
Yes, it's converted over the one week delay, through the built-in feature.
You cannot 100% guarantee profits every time, you can just increase the probability that you make a profit, particularly over the long-term. If you purchased SMD on the internal exchange with your liquid STEEM, and the price on the internal exchange was a fair amount higher than the STEEM/BTC price (I set my threshold @ at least 10% discount) the average price would have to drop at least 10% that week for the trade to become unprofitable.
Sure, it's a young currency, and it's very possible to have STEEM move up or down in price that rapidly, but you get a 10% margin of safety built-in with the SMD purchase if you purchased it at a 10% discount compared to the STEEM open market price.
It's a risk I'm willing to take because I expect it will net me more Steem$ and SP in the long-term. I see it as pretty low-risk way to grow my investment - speaking in terms of cryptocurrency trading, not as a "traditional" investment, of course - combined with holding and growing a reasonable amount of SP.
I'm starting to believe you. This is actually a pretty important service you're providing for the Steem system, because what you're specifically doing is taking SMD out of circulation (buying them) when they're undervalued, and destroying them (converting to STEEM), which will help bring their price up.
I wonder - how close does the median feed price (the conversion price) track the real-time external value of STEEM?
Hey @biophil. Thanks for the conversation yesterday. I wrote a new article about this that attempts to clarify what we talked about yesterday:
https://steemit.com/money/@trending/how-to-purchase-steem-at-a-discount-on-the-internal-markets-by-locking-in-an-18-margin-of-safety-profit-on-undervalued
To answer your question below, regarding the feed, I've occasionally looked at market prices and compared them to the feed. If it's not perfectly accurate, it's very close. Certainly close enough for me to feel there's only minimal risk.
Thanks again!