As I continue on my quest to understand more about SteemIt and its ability to generate outsized returns for many people, it leaves me curious about SteemPower. In my last post, I did pretty okay. It's nothing like the $30K that a makeup tutorial made, but I was really pleased to be rewarded the way I was for my discussion on altcoins being scams and where SteemIt fit into that.
I first learned about SteemIt about a month ago--which unfortunately was a few weeks before I actually started to write--and I noticed that there were articles talking in depth about reinvesting everything back into SteemPower. One guy even compared it to an annuity that would just keep growing so that people could retire off their Steem.
Naturally, I was interested.
But I started to think in more detail about it and I was left slightly concerned that people were thinking too far into the future without rewarding themselves presently. And then I noticed a story by Stellabelle where she talked about going on vacation using her Steem reward. That was heartening. And really, many of the different stories on this site about people using that money for real life are exciting.
But I noticed a few really popular accounts beginning to power down, which can mean a couple things.
- The cats out of the bag and people are trying to get as much as possible out of their account
- There is a fine balance between the future and the present
And it made me think ...
How Much SteemPower is Too Much SteemPower?
In my question to understand how this site works, I decided to start powering down my SteemPower, though I have a few complaints about that, which I'll touch on at the end.
Now I don't really have all that much SteemPower, so other than for the sake of experimentation, leaving what was in there is a fine example of building an account over the long-term. And future SP that I earn will most likely stay as SP while I try to learn more about this platform.
But I only have 364 SteemPower, which is vastly different than some accounts, which have 100,000, if not more, locked up in SP. And it started to make me think:
Should people be holding hundreds of thousands of steem, equivalent to 3x that in USD, in their SteemPower?
I ask this for a few reasons. The first is because this is still a new platform. If you look at the logo, it says beta, so even the development team is not ready for this to be in the primetime. And that's perfectly fine, but is it wise to tie up hundreds of thousands, if not millions, in an experimental platform?
The second reason I ask that is because of basic portfolio theory.
For many people who own SteemPower in the hundreds of thousands, I would wager that this is likely a disproportionate amount of money in your portfolio. And if we look at portfolio theory, the argument is that you should be well diversified so that if any single asset collapses, you don't suffer significantly.
What happens if SteemIt doesn't work as we expect it to--or worse, some people start behaving nefariously--a significant amount of your portfolio is tied up in this relatively illiquid asset. Consider that on Bittrex (just one of the exchanges), there is only 477BTC in available liquidity for Steem and only 23.7BTC in available liquidity to SteemDollars.
What that means is that there is less than half a million dollars worth of buying demand for Steem despite the market cap being in the hundreds of millions. That's just not very liquid and, if something bad were to happen to SteemIt, could mean you watch tens of thousands of your hard earned Steem evaporate in value.
Are We Being Greedy?
So we have to ask ourselves. Are we being greedy? Are we so focused on trying to become SteemIt multi-millionaires in a matter of weeks that we are not thinking about how this factors into our overall investment portfolio?
I would say yes ...
If people want to hold SteemPower, that's entirely up to them and is basically the point of the site. But there are other assets that people can hold to diversify their portfolio, even using their earnings on Steemit to push them into another tax bracket.
For example:
You could start to sell a little of your Steem, turn it into bitcoin, and then sell that for cash (maybe keeping a little bitcoin since that's another asset worth holding). With that cash, you could start investing in other types of assets, such as stocks, bonds, or real estate.
As you move your cash around into new assets, you begin to build a portfolio that can start working for you. Imagine if you could build a wicked strong investment portfolio because of your writing.
I think the focus on the easy money on SteemIt could be a risk to your portfolio. I'm not saying you should liquidate everything because everyone is their own investment manager, but as I said in my previous post, having something tangible would be nice.
My Complaints
On the topic of my complaints ... I decided to experiment with what powering down means. I've got five days left, so I don't know the outcome.
However, I was left with only one choice: power down. I couldn't dictate what percentage I wanted to power down.
For example, what if I only wanted to power down 50% of my holdings, leaving the other 50% as my longterm investment? Even if that takes 104 weeks, being able to dictate what exact percentage would be an ideal way of exhibiting more control over one's portfolio.
What do you think? How does your SteemPower factor into your overall investment portfolio? Are you prepared for the possibility that this could all go away? Comment below.