Why I Want to Short Steem [Beyond Trading –part2. 08/23/2016]
Do not get me wrong something very similar to steem(it) will be the next big thing in social media (Hopefully Steemit itself will make the required changes). BUT with the current design/ in the current state Steem has now ways to go but down. Down in price, down in adoption, down the drain.
There many things than need to be fixed, fine-tuned etc with Steem. Maybe I will write about them sometime later on, but the big ,should I say enormous flow, going well above all else is:
There is no reason, no logical, making financial sense right now to buy Steem!
I know the usual, blank answer – “People will buy to have more curation power.”
And near here lies the great problem. It is a dream, a hope with no logical justification. The matter of fact is the current steem design buying steem to power up to curate makes no financial sense!
To make $1000 a week in curation rewards one must invest 570,000 USD!!! And this is the current rate (with the big inflation/bonuses)… The situation looks even more ridiculous when when we get to the ‘normal’ 10% inflation of steem…and a meager 2.5% average curation reward .
I hear someone is saying – “people will buy smaller amounts also”…. Let me tell you about the small accounts math also – to get $1 a day in curation rewards, at 1.5 USD/Steem, you must buy $7,800 worth of Steem.
Intrigued. Do you think it is the greatest way to spend eight thousand bucks? LOL .
So to get back on topic,
Who is/will be buying Steem
Definitely not the writers – the few chosen to get the big bucks, are getting their pay, cashing out what they are allowed and ‘investing’ in SP what they are forced to invest.
The users that enjoy ‘the excellently curated content on Steem it’? No they have their free, 3 steem powerd up account.
The should be curators? – Well above is explained why this is a suckers bet. Do not get me wrong, I am fully aware that a lot of them are doing just that right now – buying steem and vesting’, but those are just the masses, the 95% making the wrong move, the one from whom the money are extracted.
The only one left are speculators – speculators speculating that someone in the future, for no logical reason will come and buy their steem for more than what they paid for it… Excellent strategy!
So, why the topic of the post?
In this so described above world a player was left out. The whale that got early or was close enough to the creators/founders of Steem(it). They got their Steem for virtually nothing, but being at the right place at the right time… 99% of them are not just lucky, they put/or reaffirmed themselves when they saw the potential opportunity. That is to say they are mostly aware of all the facts explained above. They know where the price is headed so they (although somewhat cautiously as of yet) sell their steem. I even think there are somewhat doubting themselves right now and think there might be hope for price hike. But at least they hedge their bets and sell…. Sell like crazy by non-whales’ standards.
The trend will just get stronger. There is no one (virtually or for solid reason) and a ton of acquired for ‘free’ steem coming in to the market every day…and more and more so.
PS
Min. target is $0.30 /Steem (as of the time when Steem has 200Mil supply[1])
Reasonable target is $0.15 /Steem (as of the time when Steem has 200Mil supply)
[1] current Steem supply is about 137 Mil
What justification do you use for those numbers?
I think people also buy influence, not just for immediate financial reasons. Influence and reputation can bring huge financial returns in the future.
Can you explain how 10,000 btc went from buying a pizza to almost $6M in real value in just over 6 years? Can you explain how the market sustains around $1M in new bitcoin created every day? Is Bitcoin a superior technology to Steem (no)? Does Bitcoin have a much stronger network effect (yes)? What can change the balance of power the network effect brings to Bitcoin? IMO, a growing social media platform which is decentralized and pays people directly for their content creation efforts.
You're fine to hate on it, but doing so while also saying
Seems disingenuous to me. Thanks for sharing your opinion.
What exactly in the Steem economy are you comparing to Bitcoin? Steem? Steem Power or SBD?
That's a good question. Since the economy of Steem is very unique (built in inflation, pegged assets, vested shares which are locked in for a total of 2 years), it's hard to make a direct comparison. They are both based on blockchain technology, and they are both cryptographically secure tokens of value. I like the multiple levels of security so people can do memos without exposing their active / owner key. Personally, I think Steem/Steem Power/SBD (together) could end up being more valuable than Bitcoin because it has a lot of flexibility. You can hold SBD. You can hold Steem Power. Or you can use liquid STEEM as needed. On top of that, it has direct perceived value via the social media platform and can be a gateway for non-crypto users to get into crypto (I wrote a post about how it converted my wife after three years of my own failed attempts).
So the answer to your question is the value of all three combined. They all compliment each other to provide more features than Bitcoin. Pump and dumps become difficult when Steem is Powered up. That's a good thing, IMO, and encourages long term investment. A single token (STEEM, Steem Power, SBD) may have some downsides compared to bitcoin, but together, I think they combine to provide a lot of upsides.
Ok, thanks! Now to answer the question you asked @james-show: Bitcoin went from buying two pizzas for 10K to where it is today because it has succeeded to be perceived as a viable store of value/monetary asset. The only token close to that is SBD, but SBD needs STEEM to have a price of above zero and that's exactly what James and I are asking: what makes people think that STEEM will be valued at above zero? I can think of "fun" and "liking the platform", but no reasons an investor would take seriously. I am a financial advisor, who loves Steemit and has put his money where his mouth is. I am worried if I don't find any reason to tell even savy investors to invest. Please don't get me wrong, I'm not attacking you, but what you express is mere wishful thinking and evading the question.
"So the answer to your question is the value of all three combined. "
You can't even price that. That's your subjective perception and I totally understand that, because I feel (!!!) the same. But to an impassionate investor, it looks like being asked to be a greater fool.
Of course, things could change. If I did not believe that, I would not have written this, but changes have to be made:
https://steemit.com/steemit/@fabio/so-who-is-actually-paying-the-steemit-bill
Thanks for the link, I replied there as well.
I disagree there because STEEM is also a valid, liquid cryptocurrency and Steem Power is even more valuable as a long term store of value that could (potentially) even increase in value as a rising stock which splits does. That, surely, relies completely on the value of STEEM rising in value. :)
What prevents us from asking the same question of any cryptocurrency? Of the USD itself or gold/silver? To me, STEEM can have value because of it's combined value in the Steemit ecosystem with Steem Power and SBD.
I think all decisions investors make fall on this spectrum to some degree. We don't know the future and if we could make completely rational decisions here, everyone would do it and the price would already represent that future value perfectly. This is the chaos of the market. :)
Sorry, that was not my intention. I truly do see STEEM, Steem Power, and SBD as directly linked together.
Why not? Because no one's done it before? I think the market will grow to price it if Steemit ends up providing value to others.
Thanks again! Unfortunately I don't know how to quote you like you did, but I'll try:
"I disagree there because STEEM is also a valid, liquid cryptocurrency and Steem Power is even more valuable as a long term store of value that could (potentially) even increase in value as a rising stock which splits does. That, surely, relies completely on the value of STEEM rising in value. :)"
You answer your objection yourself, don't you? STEEM is explicitely designed as a hot potato. To make it extreme: it's more like sand and not like gold. It is not scarce. You can't compete with Bitcoin with such features.
As for evading the question...please keep in mind that I am not native speaker, maybe it was the wrong expression. I was not meaning to imply that you are consciously evading it. I also do not take any offense or things like that, because what I am trying to say is that you are evading the question for yourself and fooling yourself out of "confirmation bias".
Let's try this:
I guess you have heard about the russian clone with their GOLOS. You are not emotionally attached to it, I guess. So now try to explain to me why you think anyone is going to buy GOLOS just to make russian authors happy?
Does that make sense?
Last but not least, the pricing. The current way of giving the value you (and I) perceive a price tag is the market cap in Steem/BTC. The concept is flawed on its own, but that's what I wanted to say: there is imho so far no way to price the combined value you perceive. You say "if Steemit ends up providing value to others". Of course it is valuable to all kind of people, like us. But it's the people who buy Steem who actually make the price tag and if they think they are just here to pay the show, they won't do that very long.
who will buy steem power?
people with attention deficit disorder ... you know, about 65% of the population ;-)
Short term you may be right.
Steem user growth is slowing and the price is dropping rapidly.
The trading volume in STEEM is also rather low to support the current marketcap and at 20x collateral the STEEM DOLLAR capitalization will be in trouble in your price target range. It seems 100% inflation is a bit too much to make STEEM acceptable to hold for short term trading/speculating.
However Steemit is not a model that cannot be tweaked to get the balance right. Nothing a hard fork cannot solve at this stage.
I agree that it can be fixed!
The article however is not about 'the 100% inflation"...which is btw way not 100% but more like 300% right now... but even that is not the problem I am writing about. The #1 issue is: the curation rewards as they currently stand - DO not justify buying Steem (and powering up)...
There are numerous other flows in the current Steem design (all fixable imho, although most will take paradigm change in the whales and/or founders way of thinking)
I've been rummaging through everyone's accounts and looking at how their Steem Power correlates with the amount of income they make when voting. I've been looking at perhaps putting in some money and looking at return on income. I've decided not to.... simply on the 72 rule and the fact that it'll take 6 to 8 years for Steemit to be at a peak similar to Facebook - Twitter. Just by reading content and voting and making the odd post.... I could THEORETICALLY have 2.5 million Steem Power in my account....... August 2020. So your correct .......... Why bother putting money into this. I would rather speculate elsewhere.
I agree with you that curation rewards aren't a good argument to buy STEEM. But imagine there were no curation rewards whatsoever. Could there still be a reason to buy STEEM? Absolutely yes, if you believe it will increase in value. (Of course this does not mean that it necessarily will increase in value nor should be purchased.) The curation rewards are icing on the cake from an investment perspective, nothing more.
It's like a finger pointing away to the moon. Dont concentrate on the finger or you will miss all that heavenly glory. --Bruce Lee
I'm personally still learning how and if the curation rewards mean much but it's not my focus either. Reading great content and learning is, then the social aspect of more intelligent and though provoking friends than FB offers. And investment-wise I just added $25 to my meager coinbase account, so I can buy bitcoin with it, so I can buy Steem to sit on for awhile. I think that's a worthwhile investment of small amounts of money at this phase of the platform's career for sure. And (full circle now, haha) time spent curating can be used to purchase small amounts of Steem, so I guess that makes curation worthwhile as well, from that perspective alone too.
Great quote btw! Sorry to double post, I got lost in my first point and forgot to say so, haha
Why would they believe STEEM to increase in value? Do you believe so? Why?
I am an investor and I know when a good thing is here! and STEEM my friend, is it! You have to keep mind how early in the stage we(steem) are and visualize the possibilities. Don't worry about the price as of now. Personally, I just want to continue buying low until this thing really takes off and besides, I like to watch my money grow and Steem, I've noticed fast accumulation via 'interest'. Best and most fun investment I've got involved in. Steem ahead!
I agree that the curation system is not quite right. I don't believe that with higher direct monetary incentives it would help bring and highlight better quality content on steem though. The less obvious incentive is about helping to control the quality of content on steem bringing more value to the system based on content, but this alone is not enough. You may be right, steem needs to incentives buying in more, speculation is not enough.
try looking from from my point of view and tell me what you see
https://steemit.com/steem/@algimantas/steem-price-chart-and-further-prediction-on-steem-and-sbd
If it is not clear from my post (and the main point was to make it clear-ER). The problem is that those new 1000s of people have NO INCENTIVE to buy steam....I know some (most???) of them do anyway...but they are stupid morons just gambling, with no justification or reason. The numbers show you should NOT 'Invest/buy steem' and this is a huge issue.