Why STEEM Drops More Relative To Other CryptocurrenciessteemCreated with Sketch.

in steemleo •  13 days ago 


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Most of us are aware that the price of STEEM keeps dropping at a faster rate than other cryptocurrencies. Over the past year, STEEM steadily moved its way down the list on coinmarketcap.com. This is viewed negatively.

But is it?

To answer that question I think we need to take a look at who is selling. The reason any asset moves down in price is there are more sellers than buyers. Markets, at their core, are very simple. So who is presenting the selling pressure that over matches the buy side?

Steemit Inc.

It is no secret that Steemit Inc is selling a lot of STEEM each month. I am not sure what it is now but they were pushing close to 800K a month for a long time. At this moment, I would not be surprised to read that it is still over half a million STEEM dumped each month.

We all know the financial situation the company found itself in. The company was dependent upon STEEM to pay its bills.

So is this a negative?

To start, long term, the more Steemit Inc sells, the better for the token distribution. Having so much STEEM in the hands of one entity is not healthy for the ecosystem. It hurts while it is taking place but if 800K is ending up spread out in a lot more hands, this is a positive.

Also, Steemit Inc was selling due to financial difficulties, not a lack of confidence in the platform. Many companies that are the primary developer behind blockchains are finding themselves in the same situation. It is something that is not exclusive to Steem.

Applications

Steem is one of the leading platforms for the creation and usage of applications. Running these networks cost money. There is development, employees, servers, and a host of other costs that come from running a business such as this. Most are operating as thinly as they can but one cannot eliminate all expenses.

In other words, there are outlays that come with running any business.

The applications find themselves, even today, in the same boat as Steemit Inc. They are having to sell STEEM on a monthly basis to pay the bills. Since we still have not seen too many business models that create self sustaining entities, these companies are dependent upon the conversion of crypto to keep going.

This, of course, places even more selling pressure on the market.

Poor People

We know that much of the world has very little in terms of financial resources. This is true in both the developed countries along with the third world nations.

Steem did a good job attracting people who found a way to pull in some money by doing things online. The system that is in place creates STEEM on a weekly basis that is paid out to those based upon their activity.

When you look at the top 100 currencies on coinmarketcap, you will find this is novel idea. Most of the currencies do not do this.

This fact adds a different layer to Steem that others do not have. There is a percentage of the people on Steem who use the money earned to pay for things such as food. In other words, people are earning and converting it for to survive.

Personally, I think this is a wonderful use case for STEEM and do not view this as a negative.

Obviously, there are other sellers not mentioned. We have people who lose confidence, spammers who convert their haul, and some who just look at it is free money. Nevertheless, I think the ones I mentioned covered a large percentage of the selling pressure.

Here we see why the price of STEEM drops further than other cryptocurrencies. The reason that is the case is because we have activity. We are successful in attracting developers who created businesses while having users earning some money for their efforts.

Tell me the others on the Top 100 list that do that?

Certainly, a proof-of-work blockchain like Bitcoin gets slammed even more when the price falls low enough to force the miners to sell their stake to stay in business. Something similar exists with POS when the Witnesses have to unload the token to pay their expenses. However, I doubt you will find many other blockchains that have the additional selling pressure coming from dozens of applications and thousands of people who simply need money.

It might sound crazy but the success of the Steem system is a detriment to the price of the token. Until the applications (and Steemit Inc) figure out a way to sustain themselves without depending upon token sales, we will see an added layer of selling pressure that is relentless.

Selling that comes from a lack of confidence can happen at any time. It is often inconsistent and sporadic. People get antsy at different times. As long as widespread panic is avoided, things are fairly safe.

Systemic selling that comes when an entity needs to meet expenses is a different story. This is consistent, frequent, and usually in large chunks. Companies know when their bills are due hence they do what is needed to be prepared for that.

The same is true for individuals. If I am using the Steem platform to pay my rent, I am well aware of when that money needs to be in. This means, if I am in this camp, each month, by a certain date, I am a seller of STEEM.

Essentially, I am making the case that the price of STEEM drops more relative to other cryptocurrencies, over time, simply because there is very little happening on those blockchains. Again, how many of the Top 100 have dozens (if not a hundred) applications operating with the token as the primary vehicle for sustainability? Also, with so little traffic, how many are having to upgrade their servers like Actifit, Splinterlands, and Steem-Engine due to the activity that is taking place? If nobody is using my application, I can host it on my phone, nobody will care.

Each week, the blockchain distributes hundreds of thousands of STEEM to the people I just described. A percentage of them are dumping the token out of necessity. Hopefully, this will change as our economic model shifts with the change in business plans. For now, this is the situation we find ourselves in.

As I wrote on a number of occasions, there will come a time when the amount of liquid STEEM available is very scarce compared to the need for it. We are not there yet.

Fortunately, as I will show in another article tomorrow, there is a floor on the price of STEEM.

Have no fear, this is not going to zero. That I can guarantee.


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Is Steemit Inc still selling so much Steem? From their latest updates they had dramatically cut their costs of running the servers and had started to get some decent advertising revenue.

I read a couple places that they are still selling.

I never checked it out myself but it would not surprise me. The amount of advertising, I am sure, helps to offset costs but will not cover them all. Blockchain developers are not cheap as we all know and Steemit Inc has a couple of them.

The problem is not really the selling pressure. It’s the lack of buyers. No one is buying that Steem. The further we drift away, the less exposure we get.

Pienso que los que estamos en este Proyecto sigamos circulando para mantener y mas adelante fortalecer cada STEEM. Si algo voy aprendiendo de todos los usuarios, es que mientras mas nos concentramos en lo que ganaremos, descuidamos poco a poco es continuo uso de STEEM. solo necesitamos intercambiar para restablecer credibilidad para algunos y constancias para otros que si creen en esto.

You can't say no one, just not enough...did you buy any recently?

The last time I bought some Steem was last year. I'm not buying anymore because I invested enough. The price is in free fall.

Cliffhanger

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Haha, I was going to write that! Have a !BEER !

To view or trade BEER go to steem-engine.com.

Hey @skramatters, here is your BEER token. Enjoy it!

Do you already know our [BEER Crowdfunding](https://steemit.com/cryptocurrency/@beerlover/let-s-grow-and-update-the-beer-token-huge-crowndfunding-as-crowdsale)

¿CliffHanger or CliffDiving?

Nah!! I agree with @taskmaster4450's remark:

"Have no fear, this is not going to zero. That I can guarantee."

Because since today, I know pretty well at what height down the cliff the 'bouncing trampoline' is located.

And much more now that I just became the biggest Porn Star within the Steem blockchain.

Great post, @taskmaster4450: very well written and easily understood!

Resteemed for further diffusion.

Cheers and !giphy helicopter+money

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{Fortunately, as I will show in another article tomorrow, there is a floor on the price of STEEM.

Have no fear, this is not going to zero. That I can guarantee.}

thanks for re-assuring many Steemian hodlers.

As for myself,I will just continue what I do since since 2017, keep on posting and engaging the community, and buying little by little of steem and powering them up all.

Thats my formula for the meantime.

Wise words, brother

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Steem remain the best! No other Tokens has touched lives as Steem.

It’ll not continue this way, change is a constant thing.

Steem's poor liquidity flows both ways. When there are too many sellers the price crashes quite spectacularly. When there are buyers all of a sudden there is not enough to go round.

First of all thanks for this awesome post about Steem price fall. If steemit inc will keep selling their coins then we can't hope for it to go up since they're dependent on Steem selling for their survival so scenario will remain same. Do you see any change?
Also I liked your line that if will not become zero. Even I have the same faith. Thanks

I took this post as being very positive and reassuring! For me a quintessential pessimist, it is indeed welcome. Thank you for providing hope where there is a great lack of it in many posts that approach the topic of the current STEEM price.

Have a great week!

I agree with a lot of the reasons you give why the price of Steem is going down more compared to other cryptocurrencies, but isn't there way more selling pressure with POW (Bitcoin) than with DPOS (Steem)?

With POW, there is always an incentive to put in more hashing power as long as it pays for the electricity. This means that the price of mining 1 BTC should ultimately correlate with the price of 1 BTC. Of course, electricity prices are not the same everywhere, but it would still create incentives for someone to make a profit somewhere.

With DPOS, you don't have that amount of selling pressure. You have the monetary inflation which goes to content creators, curators, witnesses, (worker proposal). And you might have (big) stakeholder selling their stake for whatever reason that could be, one of them certainly is paying for development on the Steem blockchain.

You had it right with your article named 'The Steem Name Is Mud Within The Industry'. Steem(it) is perceived as having failed. It's the "Friendster" or "Myspace" of Web 3.0 Social media in their opinion.

There is only one way out IMO and that is massive REBRANDING. And I think for it to be successful, it could only come from Steemit Inc.. Not too much is needed, but Steemit.com needs to be retired and replaced with something else.

That is a great perspective as it does make some sense. I also think that the level of decline will start to slow as inflation in the protocol decreases as well as the total market capitalization remains so low as it will only be marginally lower given the room ot has. However, it also demonstrates the potential as a large block of investment could surely reverse this trend!

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Picked up another thousand today and will keep doing it where i can. It definitely won't hit zero as there are plenty of us here that will buy big if it keeps dropping. We can see everything moving forward and developing. As you say, it will only take a few people with money to buy up most of the STEEM in the markets.

  ·  12 days ago (edited)

Steem is one of the leading platforms for the creation and usage of applications. Running these networks cost money. There is development, employees, servers, and a host of other costs that come from running a business such as this. Most are operating as thinly as they can but one cannot eliminate all expenses.

One of the potential largest seller of Steem are witnesses. According to @aggroed post, server and electricity cost break even at 3 cents. Even if we assume it 5 cents, witnesses can still sell Steem until it reaches 5 cents.

Right now a top 20 witness makes 110,000 steem per year or something in that vicinity. Each Steem is worth 20 cents right now. So, witnesses are earning $22,000 per year. I run two witness nodes (and pay for half of the minnowsupport rpc, but that's separate from this). My nodes cost $120/month each. So, that's $240/month. So, that's about 3k per year. The price of steem has to get down to 3 cents before I start asking myself "do I even want to run a node here?" Maybe some of the backup witnesses would stop hosting Steemd by 3 cents, but I don't see enough leaving to stop the chain until Steem hits 3 cents.

If all witnesses (approx 200) earn 3M Steem (110Kx20+800K= assuming rest of the witnesses earn 800K), and sell 80% of them, then it is 2.4M Steem selling pressure per year. Though are active and work hard for the Steem chain, but they may not have investor's mind-set (ROI or speculation), therefore, can keep selling at low prices.

It is not their fault. It is the fault of vastly STINC's and large shareholder's not doing enough marketing for Steem to bring new investors.

I am 100% agreed with @themonetaryfew, Steem and Steemit.com requires rebranding to bring in new investors.

Right?

And it doesn't need to cost much, if anything. There just needs to be a clear break with the past.

The old Steem is dead, long live the new Steem.

In this landscape with tons of useless cryptos, Steem should always be a top-20 coin. There are no excuses for a project like Steem not to be up there.

One likes listening to good or hopeful news.

Love the cliffhanger 😜

This makes perfect sense! If we look at blocktivity.info STEEM has always been one of the top most active blockchains!

Thanks for this. There were a couple of things I hadn’t thought of.
I also thought maybe the proliferation of ‘tribes’ was contributing to it. Could it be all the added ‘value’ being created from thin air through tribes like Leo, pal, sportstalk, etc is diluting the steem price?

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As @shanibeer said, that only adds to the need since it did create a "sink" for STEEM. There are lots of places to put STEEM on Steem-engine. Even when one sells the token, it is for STEEM, not the other way around.

And when STEEM is put in there to buy a token, it is held as a backing for the Peg. The STEEM is not sold on the open market (outside the ecosystem).

Sure, but I’m thinking of the fact that people are just accumulating these tokens and they haven’t really changed their behaviour except maybe strategically added some extra tags. Their accumulation of steem is the same and at the same time they’re earning extra tokens (duplicate or triplicate earning).

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Thats a good thing as long as the earned tokens remain in steem ecosystem(scot) and not just converted to steem only to hit the external markets for fiat or other crypto

I guess there could be some selling pressure through offloading coins, but you also have to invest Steem to buy any tokens. I believe about 1 million steem is pegged at last news.

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We soon see... I feel end of this summer we see what happen 👌🌟🌟🌟🌟🌟

The end is coming... the clock is ticking.🕚

So you want see this very ? :))

I don't know...📢🆘📉

It looks like you like it .

The distribution process is healthy.
It means new people get in easier.
We just need to continue creating quality contents, engagement and other business related apps.

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Some great points here.. thanks for sharing!!

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I don't think that this is thrive mode. This is still in beta mode.

bravo

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At this point is does not upset me because I start to expand outside of Steem.

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What do you mean with expanding outside of Steem?

Gee, i got out side and i see my inner keys are changed, but not my password, and my steem power is not worthy, i vote and no effect...

Do you think the next HF will fix anything?