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RE: Why I Have Decided To Stop Powering Down My Steem Power For The Long Term
Wouldn't we see less selling pressure if the interest rate was going up, not down? Providing more of an incentive to hold steem instead of sell it?
No, when interest rate goes up for USD, there is more incentive to hold on to USD rather than an alternate currency (gold, cryptocurrency, etc) Therefore selling pressure is expected. In terms of trading environment, many traders are actually borrowing USD to trade thus when interest rates go up, they will need to reduce their holdings in order to reduce interest payment. This in return causes all other alternate currencies to go down in value. In BTC case, it is a bit different and conventional economic model does not apply to BTC because majority of the users of BTC are in a form of shady business or another.
The underground market supports the economy of BTC thus this is why you see quick recovery whenever there is a spike in sales volume. The drug lord and cyber scammers will not allow the BTC to drop too much in value as most of them are using it for 'business' purposes.
In Steem case, it will still take many years before there is wide support for it. Remember Rome was not build in a day.
Youre correct, as far as you go, but failed to address the point of the article.
Interest has not gone down, it is going down if you want to compare it to a RW interest rate situation, imagine you had an opportunity to invest in a 24 month CD. The interest rate was .075%/day.
If you then learn that the interest yield on the CD is going down to .058% a day in a month, then even lower, the CD does not become a more desirable investment, it beccomes a less desirable investment.
That is to say that no matter how much an X% SP interest rate is encouraging people to hold steem power right now, a lower percentage interest rate will encourage them less in the future.
Of course, this is a wipe right now, but as an incentive to hold for 24 months, it just doesn't track.
Exactly to the point. Thanks for point out areas that I have missed. This is a classic bond investment scenario whereby you are anticipating interest rates to rise thus bond value to fall. The future value of the steem value is taken into consideration in this case. Does the classic formula of FV= Cashflow at period zero x ( 1+R) n still possible to work to compute for steem in this case?
Yep, why would lower interest rates make anyone more likely to hold?! If anything, as interest rates drop so does my desire to hold steem
Because there will be less SP being generated as the interest rate falls. This reduces dilution which is generally viewed as a good thing.
High interest rate, high dilution
Low interest rate, low dilution
These forces are a yin and yang on each other. Both cases are an incentive to hold if you believe in the social media platform. If you don't believe in the platform, it would be wise to cash out. STEEM is nothing without it.
If interest rates for SBD are going up, I think this makes more of an incentive to hold onto it.
the topic is Steem Power, not Steem Dollar (SBD). steem dollar interest is already set at 10% per year.
That is definitely one way to look at it, im personally looking at it as people are going to be buying steem to vest while the interest rate is still high so they will have a stronger position when steem becomes based more heavily on curation in the future.
@jcornel ur right.... If interest rates are going down that is less incentive to hold on to the currency.... Its like the fed lowering interest rates to get you to buy more stocks..... Ultimately like anything else this is a market... We will see people that dont understand that cash out and other more competent people will power up and u will see the content change from people who got the steem for free to people who bought cheap after the technology proves that it works...