How The Steemit Game Has Changed Thanks To A Rising Steem Dollar
Why The Game Has Changed
Throw out the books as to what you thought you knew about Steemit's 3-currency system (SBD/STEEM/SP).
As I write this, Steem Dollars (SBD) are currently valued at $2.05 and Steem is currently valued at $1.09. What makes this situation so unique is that the value of your Steemit posts are being understated in the present. For example, my post shown here displays a final post value of $13.04 as of time of writing. It resulted in a final reward of 4.909 SBD, and 4.671 STEEM POWER thanks to the default 50%/50% split. Based on the above metrics, the total USD value of my authored post was actually $10.06 + $5.09 which approximately = $15.15. Where this gets even crazier is the fact that the author is only entitled to a fraction of the post's final value.
How can we best position ourselves? By and far, it comes down to the value of SBD, and remember that SBD is essentially Steemit's obligation to pay $1 worth of Steem. Will they fall, stay where they are, or continue to appreciate? Everything I've read and come to understand about Steemit suggests that they should be compelled to fall since their mechanism only obligates $1 worth of value... but one look at the latest chart should begin to question that logic. Is a store of value component being imbued upon SBD?
Not only were Steem Dollars able to fend off the downward pressure, but they were able to bounce higher after the latest dip. This should shake off any notion that they are only being used as a intermediary currency waiting to be sold off or converted for Steem. No, fellow Steemians, they are being accumulated. By who or for why, I do not know.
But here is what we do know.
- The supply of Steem Dollars is rather constrained. There are less than 4 million Steem Dollars currently in circulation.
- While Steem Dollars can be converted into $1.00 worth of Steem, conversion is not obligatory.
- Tether is facing uncertain times.
I add this last point because Tether (UDT) is often viewed as the stable currency that is largely a 1:1 depository with US Dollars. But with its latest scandal and its shady ties with Bitfinex, there is very little stability left in the crypto world when it comes to pegged currencies. At least with Steem Dollars, the likeliness of SBD falling below $1 is unlikely given its ability to always be converted for $1 worth of Steem.
So this comes back down to what is going to drive SBD down? Right now, the currency appears to be viewed as a bit of a reserve currency, backed by the amazing power of Steemit itself and in the future of Steem. Steem dollars can appreciate in value given their very limited inflation rate. After all, they're essentially an IOU system akin to US Treasuries.
Is this to say that SBD will only continue to go up? By no means, absolutely not. But can they? Maybe.
So how does one respond to this new dynamic?
There's really only a few things one can do:
- Sell your Steem Dollars - the trend won't last.
- Buy more influence in the Steemit ecosystem (ie. Steem Power).
- Join the craze and accumulate Steem Dollars.
I've been in the camp of #1 for well over this past month. But watching SBD defy that latest dip suggests to me that this >$1 trend isn't about to end anytime soon. This elevates my position to #2. While Steem Power locks in your capital, it's ability to generate meaningful income is second to none (be this through the staking income or through post authorship). Above all, it has the ability to generate more Steem Dollars on a daily basis. As for # 3, I'm just not bold enough yet to consider Steem Dollars as my primary store of value currency...
What are your thoughts on the situation? How are you responding to this changing dynamic? Do you believe that the >$1 SBD situation has staying power as the crypto markets soar to new highs? Leave your comments below.
...and for the sake of full disclosure, I walk the walk when I talk the talk. I just added 600 Steem Power, which is roughly a 12.5% increase for me.
very interesting post. I would sell my SBD because I read in the white paper that when SBD goes over 1.10$ there is negative interest on holding it.
So i would earn in SBD and then cash out.
negative interest? How is that carried out?
I don't completely understand the principles behind this but this is why the Steemit.io whitepaper says:
"The primary concern of Steem feed producers is to maintain a stable one-to-one conversion between SBD
and the U.S. Dollar (USD). Any time SBD is consistently trading above $1.00 USD interest payments must be stopped. In a market where 0% interest on debt still demands a premium, it is safe to say the market is willing to extend more credit than the debt the community is willing to take on. If this happens a SBD will be valued at more than $1.00 and there is little the community can do without charging negative interest rates.
If the debt-to-ownership ratio is low and SBD is trading for less than $1.00, then the interest rate should be increased. This will encourage more people to hold their SBD and support the price."
Wait a minute... that actually suggests that they would have to incorporate something they haven't done. It doesn't suggest such a mechanism exists yet, let alone is in operation. The interest rate has been as 0% for some time.
Thanks for the info.
True, which is why I am bit confused
It reminds me of the Fed's dilemma with negative interest rates, because essentially these are the same dilemmas. They dont have the tool's to do it yet, but are theorizing its possibility (esp w/ Europe already doing it). It would come down to whether or not the risk was great enough to do it. I'm not sure if it is for Steemit. What's the problem with a rising SBD again?
You should also take the 50/50 payout of SP/SBD since Steem Backed Dollars are currently trading above their par value of $1 USD, then use SBD to buy more Steem Power.
Great post, thanks!
I think Steemdollar should be seen as for what it is that means its value is exactly 1 dollar worth of steem. Everything else on the up or downside is purely speculation. What I found remarkable is the fact that we had the same situation betwenn Mai07 and June07. Steemdollars was raising to new highs and afterwards steem token went up almost 15x, from 0,15$ to over 2.40$. So this gives us right now the opportunity for an impressive rise in the value of steem...in the next few days and weeks.
Now wouldn't that be nice to see. Although I'm already in the audience that believes Steem is overdue for a pop anyways.