A guide to investing STEEM - points to consider


I never really want to blog about the price of STEEM or other investment related matters. Yes, I have criticized the broken economics for many years, and continue to do so, but I tend to avoid talk about price itself. I have in the past talked about stock prices, especially AMD on Steem in the past, but crypto is too wild and irrational. There's too much tribalism and people get upset or offended at the drop of a hat. However, I see too many newbies throw their money at STEEM, and sometimes I feel the urge to offer some perspective so readers can make a more informed decision. I have always hesitated in doing so, but years later, I'll give it a shot. I'll try to steer away from controversial matters and avoid pointed declarations wherever possible; instead guiding you to the right things to research and consider. One important thing to mention - this post does not just look at STEEM in a vacuum, but as part of the crypto market; and as such, STEEM will be competing with other tokens for your investment.

lease note that this is not financial advice and I'm not an expert - merely sharing some facts and my experience following STEEM as an investment over the last nearly 4 years.
First, some context and history.

For personal context, I have been following the crypto space ever since Bitcoin miners were buying up the graphics card I wanted to buy - AMD Radeon HD 7970 - in 2012. I had to go with GeForce GTX 680 instead as the 7970 was constantly out of stock. At the time BTC was $5, but I had no way to buy it where I live. Anyway, the upshot is I was familiar with the crypto market and was no stranger to crazy volatility by the time Steem arrived. Unfortunately, none of that prepared me for the wild ride Steem has been. I won't bother with the usual basics like "buy low, sell high", don't FOMO or make any impulsive/emotional decisions, HODL if you're unsure, study the token you're investing in detail, study the price history, don't gamble what you can't afford to lose etc. etc. I knew all of that and I'll assume most of my readers do too. But it's the finer details that often go ignored, that I learned the hard way, that I'll talk about here.

Before you invest in any token, it's important you understand the history. Steem was ninja mined into existence in late March 2016 amidst a fair bit of controversy. I'm not going to offer my opinion on contentious matters, but please do your own research on Steem's ninja-mine launch as it plays in the minds of potential investors to this very day. The fledgling coin quickly saw some adoption and hovered around the top 20 mark through Q2 2016. It steadily climbed up the ranks till it hit a meteoric pump (and later dump) to $4 in July 2016, rising up to #3, ahead of XRP, behind ETH and BTC. Unfortunately, STEEM was hyperinflating at over 200%. As a result, it plummeted 97.5% to $0.10 in just 4 short months, the most spectacular decline I've ever seen for a major top 5 crypto asset. Eventually, Ned managed to convince Dan that the hyperinflation was totally insane, and the inflation was reduced to 9.5% in December 2016. Steem's economics have remained largely the same since, apart from some minor tweaks.

Since then, the STEEM token has been one of crypto market's greatest failures, falling from a stable top 20 position down to the 80s. Not because there are tokens that have performed worse, many have, but because no other network with this level of usage and development has capitulated this heavily. Here's why.

Inflation is key

This is obviously the most important factor. The December 2016 reforms were a major improvement over hyperinflation, but it's still too high, and remains too high. Taking up a 10% SBD debt makes matters worse. This should have any investor's alarm bells ringing, so please understand the risks involved. Study the inflation characteristics of STEEM, how new tokens are allocated, how they are dumped, etc. Hint: dishing out tokens for disproportionately low value creation is unsustainable.

User activity != token value. Economic activity == token value.

No need to obsess over dapp tracking websites, transaction counts etc. No one cares, and none of this "fundamentally" indicates token value. It's all about how capital flows through an economy. Instead, look at fundamental economic activity of STEEM. Hint: Precious little of it on STEEM.

On a related note, if STEEM hits $X, don't start celebrating and declare it now somehow a Reddit competitor. No, that will only happen when it has dozens of millions of daily active users, irrespective of price.

Token value rests on speculation and future development, not as much current product

Steem objectively has greater usage than most tokens above it, but it has proven to be a flawed product. Investors are more likely to invest in a future product that has not yet failed, against a current one that has. Note however, that the market may respond strongly if Steem's future upgrades and roadmap are worthwhile.

Never power up

Don't do it. Earning 10% curation rewards on a 10,000% voltatile asset is pointless. The 3 month window is far too long for a very volatile crypto market. You will lose out 80% profit potential when/if the time comes for STEEM to pump, waiting for tokens to power down. I get it, you're a HODLer and a believer. You find giving out money powerful. However, there are much more efficient ways to massage your ego. If you are truly religious, you'd want to accumulate more STEEM, you'd want to sell high and buy more lower.

STEEM is, after all, an altcoin

This may at first seem like a negative, but this is how you can justify investing in STEEM. Having completed nearly 4 years on the market, STEEM can with a high degree of probability be classified a degenerator. It is a long, long way away from establishing characteristics of an oscillator altcoin, and it is highly likely that it never will. You can read more about about degenerators and oscillators here.

How do degenerators work? They can gain a substantial amount in short periods of time, but over time keep losing value in BTC/sats. STEEM is a particularly potent degenerator, burdened by high inflation and moreover "dumb" inflation, so to speak. The flipside is that there is also a lot of "dumb" money (no offense, it's just jargon) emotionally invested in, powered up and doggedly HODLing STEEM. Both combine to make STEEM a strong degenerator.

The end result is that, while STEEM will lose satoshi value for most of its existence, there'll be short durations where it can increase its satoshi value exponentially. This is where STEEM is worthwhile, if risky, investment. Get in when STEEM is bottoming out versus satoshis, exit when the pump happens. Feel free to buy back in later when the price is low again.

Now, I'm sure someone will point out that history does not dictate the future, and STEEM will break out of this cycle and maintain a stable value of 0.001 satoshis at some point, and onwards to $100. Sure - Betelgeuse may explode tomorrow. But an investor cannot function on hopium, they must make decisions based on the facts available, based on reality.

Support Steem with activity, investments not required

I get it. You love Steem. I want it to succeed too. But you don't have to invest your hard earned money into it. You can support Steem by creating content, curation, getting involved in some project, offering your thoughts to improve the project, contributing code on GitHub etc. etc.


I edited out a couple of more controversial points, but I think this would be a good place to get started. To reiterate, do your own research, make your own decisions. The above may come across as negative, but I'm just trying to help you and make sure you make a well-reasoned investment.


Comments 39


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01.02.2020 10:41
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01.02.2020 10:44
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great post, dude! :)
@tipu curate

01.02.2020 10:53
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Upvoted 👌 (Mana: 0/10 - need recharge?)

01.02.2020 10:53
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It's dead yo. There may be an irrational pump that'll occur in the future. Maybe not. Who knows. I'm not optimistic - just too lazy to dump, I guess. Also, a lot of the exchanges have made it super cumbersome to even use them, let alone dump STEEM.

I should actually get all the votes since I haven't dumped a single token in years now. A vote for me is a safe vote.

01.02.2020 11:30
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There are still a few thousand active users who use it and there's still active development. Granted, there are very, very few users and development is very, very slow, but it's not dead yet. And yeah, irrational pumps can happen at any time. There was one just a couple of weeks ago.

01.02.2020 12:56
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01.02.2020 23:55
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I was thinking about what you wrote here, but i think owning around 10k steem is cool. Especially during bear market.
I like steem (regardless of ninjamined stake and broken economy- although EIP helped us reducing the negative aftermath)

I hope to see steem being inflated around 1% untill the end of this year. SMTs might be a good answer.

Time might help us to improve whats broken. At least i hope so haha

01.02.2020 11:36
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There's basically no chance it'll be down to 1% any time soon. I'm hoping for a correction down to 3%-5% but let's see. No one's talking about it just yet, the focus is on getting SMTs ready and other stuff like power down period.

01.02.2020 12:58
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Great post. I was one of the victims of emotional attachment to Steem and it cost me tens of thousands of dollars. Luckily I understand now, that was just a shit show while people in the shadows were making millions 🧐

01.02.2020 17:07
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We've all been there. I'm sharing my experience so others don't make the same mistakes.

01.02.2020 17:51
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What arw your thoughts on 4 weeks power down? :)

02.02.2020 12:56
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It's a good step in the right direction, but I'd like to see 3 day or 1 week power downs. That's the only way I'd consider powering up again.

02.02.2020 13:09
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3 day is theoretically impossible due to 7 days reward period right? Btw dont you think it wouls be better to have 1 month withdraw period - security wise

02.02.2020 15:01
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Yes, that's right, a change to 3 days will also need the reward period to be reduced. There used to be a dual reward period before, 12 hours or 24 hours and then a 30 day. Since almost no rewards were allocated after 24 hours or so, and it was too complex to keep two periods, it was shortened rather arbitrarily to 7 days as a middle-ground between the two. Since then it's become clear that even the 7th day no real rewards are added, apart from hiding abuse, so going back to a 3 day reward period would make sense. But if the 7 day reward period stays, then 1 week, that's why I offered both options in my comment above.

02.02.2020 19:04
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Oh i wasn't aware of dual reward period. I honestly dont mind 7 days time frame, however considering how volatile crypto is and given the fact that price has big influence on the rewards we might even consider reducing it. Cool, thanks for the time :D

03.02.2020 09:58
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Great post, resteemd

01.02.2020 12:11
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Very interesting perspective, thank you.

Do you think that if steem can create a valuable product for mass user and then monetize it (with build in ads system, influencers getting paid in steem etc.) it can actually break out from the long term downtrend?

01.02.2020 12:43
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Seems very unlikely, unless an influential player in the space with deep pockets picks up the project, rapidly develops something that's user friendly and then runs a massive marketing campaign. With the current status quo and minor improvements along the way, I think Steem will survive as a niche platform but mass adoptions seems nigh impossible without a complete overhaul.

01.02.2020 13:00
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Many truths but also a bit negative, a good and functioning product can also have an impact on the price especially in the long run, even if it's mainly speculation. Fundamentals matter in the long run. Compared to many other altcoins I think that Steem has a real use-case (social media on a blockchain) and even a DApp ecosystem. So it is possible to see another bull run, but as you said it is surely a high risk investment.

01.02.2020 13:01
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When/if there's an altcoin bull run, there's no reason to believe STEEM won't see its fair share of pumps. My point here is more that when/if it happens, don't make the mistake of thinking it's permanent, and take your profits while they last.

01.02.2020 13:23
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Thats very ttrue, exciting tosee what happens in the future :)

01.02.2020 14:31
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I don't particularly see a future for this coin. That said I do think a pump will coincide at some point with SMT full release.

01.02.2020 13:52
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It's possible there'll be a mini-pump with SMT, but to get anywhere near previous highs it's going to require an altcoin-wide bull run.

01.02.2020 15:00
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As the previous highs all coincided with an altcoin bullrun. Yeah absolutely. Never gonna get near previous highs. Hell I'd be shocked to see steem at $1 ever again.

01.02.2020 20:40
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This is a crazy market, anything can happen. One thing is for sure, if STEEM does ever get close to previous highs, it'll be for a very short amount of time, maybe a few weeks. It's best to be prepared in liquid STEEM.

02.02.2020 04:28
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Agreed

02.02.2020 14:29
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Thanks for writing this, it confirmed many of my assumptions and I learned something new. (First time I hear the term "degenerator" for altcoins.)

01.02.2020 15:31
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Never power up. Don't do it. Earning 10% curation rewards on a 10,000% voltatile asset is pointless. The 3 month window is far too long for a very volatile crypto market. You will lose out 80% profit potential when/if the time comes for STEEM to pump, waiting for tokens to power down. I get it, you're a HODLer and a believer. You find giving out money powerful. However, there are much more efficient ways to massage your ego. If you are truly religious, you'd want to accumulate more STEEM, you'd want to sell high and buy more lower.

Some valid points in the post but this part is the single worst advice you can give anyone looking into STEEM.

Its very simple. If you want to buy STEEM, the stupidest thing to do would be to keep it liquid. You cant anticipate the pump nor can you anticipate the length of the pump. Maybe STEEM goes parabolic after a 5,6,7 weeks after you clicked powerdown. You cant know that. A long powerdown could potentially keep you from selling at a lower price point.

  1. Curation is higher then 10%
  2. You stake gives influence
  3. More influence means more votes if you want to post which in turn gets you more STEEM.

you'd want to sell high and buy more lower.

Oh really? I never would have thought to buy low and sell high.
In a nonregulated manipulated market run by corrupt exchanges that fake volume up to more then 90% anyone that thinks they can trade efficiently and doesnt have really deep pockets is a fool.

The curation and inflation gain you can potentially earn from STEEM makes a massive difference. If i held any other altcoin i would now be down 90%, instead im 30% in plus because of STEEM. I didnt trade once.
Not only is it not pointless, its exactly the opposite, its immensely significant.
I made a list of all the well known altcoins with similar drops like STEEM in price. They all dropped the same or more then STEEM but if i held any of them instead of STEEM my portfolio right now would be worthless.

If you fear the volatility stay away from crypto but the powerup option STEEM has gives it massive advantage when it comes to investment stability for anyone willing to put in some work.

01.02.2020 16:04
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I'm afraid I have no idea what you're on about. Your justification is you're a bad investor so powering up will save you from yourself? What absolute shitcoins have you been buying or making lists of? STEEM is down 98+% from ATH, dropped from top 20 to 80. It's objectively one of the worst performing altcoins. Unless you've been gambling with shitcoins outside the top 100, in which case I can't help you. Anyway, we'll agree to disagree and move on.

01.02.2020 17:43
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A bad Steem investor does not power up.

The inflation and loss of potential earnings makes it a terrible choice not to power up.

Decision to simply base your Steem investment on gambling is a stupid one.

If you won't power up then it's a better choice to stay away from steem all together. There are non inflationary tokens out there.

There's dozens of top 50 tokens that dropped exactly as much as steem but steem being what it is your loss incured is much lower then it would be by holding any one of those.

The fact remains that not powering up is a terrible move right now which is why I applaud the change in power down time which would add much needed mobility to steem.

Right now if you simply hold steem and gamble with it you not only are gambling and risking to lose that way but you have inflation working against you as well and you have the loss in earning potential while the market might keep going sideways indefinetly as far as we know.

That's why I find your advice for a "steem investor" to be terrible. If you'd advise never to powerup the better advice would be just to stay away from steem, which is fair.

02.02.2020 14:07
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There's dozens of top 50 tokens that dropped exactly as much as steem but steem being what it is your loss incured is much lower then it would be by holding any one of those.

I don't know what absolute shitcoins you're talking about. I'm not interested. STEEM is far and away the worst performing token I've followed, it's not even close. Besides, they would no longer be in the top 50 then, if it performed as poorly as STEEM. Again, STEEM has collapsed from being top 20 to the bottom end of the 100 in just a couple of years. Successful projects that were lower than STEEM's market cap a couple of years ago - EOS, BAT, MKR, BNB etc. They are literally worth 10x-100x as much now, and they have borne the full brunt of the bear market too. No amount of powering up is going to multiply your STEEM holdings by 10x-100x. I'm not even comparing to relatively safe options like BTC or ETH, against both of which STEEM has absolutely tanked throughout its history. I'm afraid I can't make any sense whatsoever of what you mean, so let's just agree to disagree and move on.

02.02.2020 18:59
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Youre wrong. Ive listed at least 15 of them from the top 50 that performed worse. Im not going to waste my time trying to list them again. Its somewhere in my posts, the exact percentages i pulled.
It might be the worst performing token you followed but its hardly the worst performing token.

they would no longer be in the top 50 then, if it performed as poorly as STEEM.

Yes they would. I tracked the drop since ATH. Steem is hardly the worst performing token.
Any token can be the worst performing one if you pick the exact worst time from which to track it but thats disingenuous.

I choose the ATH and from that point its hardly the worst performing one.

No amount of powering up is going to multiply your STEEM holdings by 10x-100x.

Why would anyone assume their holdings will multiply 10-100x? Thats a foolish thing to expect. All your complaints are complaints against the alt market.
Steem is in no way performing worse then majority of top alt coins. You name Bitcoin and ETH as if STEEM was ever even close to their name recognition and their shill army.

02.02.2020 19:37
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This is an extremely rational analysis of Steem as an investment. Your familiarity with it clearly underlies that strength, combined with investment understanding.

About the only caveat I have is that I find the social media aspect of Steem to be it's most relevant feature, and the economic factors relatively unimportant because of the generally misunderstood value of society. I have long maintained that should Steem become able to successfully develop a strong social media platform (which it has not to date) this will endow it with economic relevance, affecting price by orders of magnitude. The reverse simply isn't true.

Thanks!

01.02.2020 16:04
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That's true, no amount of market manipulation will make a bad platform mass adoption friendly. The product simply has to improve drastically to compete in the saturated social media market.

01.02.2020 17:48
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My only investment in Steem has been my time and content and although I would like to be doing much better it has been a worthwhile one. As a gateway to crypto in general it has helped me dip my toe into other coins. But the promise it first had as a content discovery platform has really not panned out and so as a financial investment it is still purely speculative. I think inflation will have to get in line with the value that is actually added to the network.

01.02.2020 16:26
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That's definitely a prudent approach, but time is a valuable resource too.

01.02.2020 17:49
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So you powered down everything ? I think, you had lot of stake at one point ?

15.02.2020 11:11
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Yes, I powered down everything in 2018.

15.02.2020 11:18
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