Why STEEM will probably continue to drop in price
I don't mean to be derogatory in any way, and personally I like the STEEM concept quite a bit, however I see the market price of the coin continuing to decline for a number of reasons:
- The dilution is very high. About 800 coins are generated every minute (1.15M per day). Granted, 90% of every newly generated coins go to STEEM POWER holders, so they are protected a great deal from this inflation. However, the overall inflation rate is a significant concern for investment purposes. A lot of folks that are truly just investors in cryptos are doing so as an overall monetary base inflation hedge. There are significant and unknown risks stemming from the inflation being seen in other, um, more traditional "assets" around the world, which are showing some inflation "strain" (to put it nicely). So an asset with significant inflation doesn't really fit the bill.
STEEM will dilute 35% just over the next month alone
- Those holding coins outside of the ecosystem (steemit.com) do not enjoy this benefit. If you want to invest in STEEM you need to buy it and hold it in the website. Many crypto investors like holding their own coins, after all, the blockchain is a peer-to-peer technology so having a third party hold you asset for you involves trust (MtGox anyone?)
It's not that I don't trust the STEEM TEEM. It's just that I have no choice. For others that may affect (limit) their total investment stake, in my opinion.
- The market had an inflection point and run-up where the market-cap briefly soared to over $400M (it is now at ~$250M). My interpretation here is the market had expectations of value creation that aren't currently being borne out, at least in the manic short term way that markets often want things to come to fruition. For example, if someone is blogging about a vacation to Peru that might be worth $5 in advertising on a Wordpress type of blog, and it makes $4,000 here, there's clearly a market mis-match in the valuation of content. Now, perhaps there is market mis-valuation on the end, i.e, perhaps the Wordpress writer who does a fantastic job to only end up with $5, should've made more like $100, but even then there is still an order of magnitude difference to be explained.
- The market may have expected more user sign-ups once the market cap soared and neared half a billion dollars. This may be the market reflecting the ability of the team to execute, which matters greatly with a cryptocurrency that's tied to a project.
A >10X run up starting around July 11th is remarkable but there's a hangover-esque downtrend currently in play
In short, the market is basically asking "Where's the Beef?"
I don't mean to be a Debbie Downer. I'm drinking the kool-aid quite bit and have a stake here as I do in other projects. I think the peer-to-peer microfinancialization of blogging and content creation on the internet, a capability that cryptocurrency technologies obviate, was inevitable, even if the mechanism was somewhat slow to materialize. However, one has to weigh the upside of the kool-aid (transformational nature of the vision) with the reality of the value-add (which in this case is content).
But, hey, you'll never read any of this anyhow, because my position will not be popular with the important upvoters (whales) that have a big personal stake in remaining Positive and Sunny 24/7...
You don't hold anything "in the website." Steem Power, Steem, and Steem Backed Dollars all exist as native tokens tracked on the chain controlled by your private keys. You can use the CLI wallet, the website, paper wallets, or any other available tool for managing those keys. You do not have to trust anyone else with your keys to power up. You can power up with CLI and then use only your posting key on the website, so you get both the security and the convenience.
ok, thanks for the explanation
what backs the steem dollar? I mean if thier is a unlimited supply, does not that mean they will eventually be watered down as opposed to Bitcoin which breaks into smaller pieces leading to more value?
great explanation
So much wrong with this article.
First of all it's less than 6% dilution per month on your STEEM. Secondly: none of you seem to understand economics. After a huge trend people will take profit and that makes the price usually fall anywhere between 40 and 60%, which is still a higher price than where it started.
this doesn't sound like "so much." 1) the dilution graph I made is correct, where do you get 6%? 2) You're second point is a prediction based on your own prognostication, which makes you comment any as valid as mine is. As an example, the coin shot up to $400M market cap when it still had less than 5,000 users , now has 45,000 users and is worth $250M. So the trending paradigm is definitely not an accurate absolute price correlation.
The STEEM dilution is 0.19% per day and 100% a year so do the math. And the prediction of how markets behave is based on 100 years of statistics and i have nothing to do with those stats.
sure, but you could prove it
Im upvotin but only because its a thorough explanation of the theory. In the end, this project will bear fruit upon fruit upon fru.......
No, its true.
Very good disucssion. Same mindset here. The biggest group of uneducated investors in mankind get's a shot to determine the price of a crypto. It's an interesting world we live in. This is quite an interesting website I found: https://www.coincheckup.com Every single coin can be analysed here based on: the team, the product, advisors, community, the business and the business model and much more. Go to: https://www.coincheckup.com/coins/Steem#analysis For a complete Steem Indepth analysis
You haven't accounted for growth. Which will massively outweigh dilution at this early volatile stage.
perhaps the market may be figuring out the marginal decline of each additional new member. A 1% dilution is 1%, it's a hard number. But I'm just guessing (prognosticating) in any, as we all are at this point.
Looks like you've been right, so far. I agree, built in 100% inflation is not a good recipe for a currency. The fact that 90% goes back to SP holders does not really help, because SP is not liquid. When you hold liquid steem, as I understand, you really do suffer 100% annual inflation. Growth in demand could compensate, but 100% annual, sustained growth is unrealistic.
Steem dollars are another interesting issue. Experience tells that every attempt to fix currency exchange rates eventually fails if there is an open market for both sides.
Now it is the storm at steem. It is normal, don't worry! Trought some time it will get equilibrium. About investment in SP you can look my post.
I just wrote this post - https://steemit.com/steem/@remlaps/what-s-up-with-the-steem-price-a-theory - where I came to an opposite conclusion. I was not aware of yours, so I'll link to it in my comments.
much like in the early Etherum days, you can hold STEEM in a linux wallet...