The Price of Steem Will Always Go Down... It's Supposed To : The Magic of Steem Power
xeldal (60) in steem • last year
The explanation here is very general and ignores the initial first year launch conditions and eventual reverse-splits. It assumes general voting participation on the platform and for simplicity uses nice round numbers.
It doesn't have to go down obviously. If there is considerable growth -- I fully expect it -- the price will go up. I just want to point out the normal / natural downward pressure. And if you're holding Steem for the long haul, you may be holding the wrong thing.
I think the following is an important part of the puzzle in understanding what Steem and Steem Power are and what they are for. In particular the price of Steem falling as a normal, expected, and healthy behavior.
By design, the total number of Steem will double in supply each year to pay for all of its utilities.
Because the supply is increased by 100% every year, if the market-cap, or total value of the network, were to remain the same, it would require the price per unit of Steem to go down by 50%.
Anyone holding just Steem for that period will obviously lose half its value.
Anyone holding Steem Power will not lose any value.
Said a couple different ways:
Given any amount of growth in market-cap less then a double for the year, will show a drop in price per unit of Steem.
In order for the price of Steem to go up, it requires a growth in market-cap more then double each year.
Any price drop less then 50% for the year, would indicate growth in the total value of the network.
Steem can fall in price by one half, each year, and your SP total value will remain the same.
I've seen people refer to the benefits of Steem Power as it paying interest. I think there is a better way to look at this and in turn explains the downward inclination of the price.
Steem is subject to inflation.
It is a short-term trading vehicle. (It is not meant to be held for long periods. It is meant to be traded)
Steem Power(SP) is protected from inflation.
It is a long-term investment vehicle. (Meant to preserve value and provide benefits, cannot be traded)
If you have 1% of the supply of Steem held as SP now. You will have 1% of the supply of Steem as SP any number of years from now.
Saying SP pays interest suggests that you're gaining value, when in fact you're not.
Saying SP pays 90% interest or more; and you won't be taken seriously. It's true in a way... it just doesn't make sense unless you understand all the other mechanics.
Let me know if you found this helpful... or confusing etc. : )
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