A few people have recently been asking me on steemit chat what my long term plan was and if I was powering down. Up until this point I was powering down a small amount because my long term goal since the beginning was to become the first steemit sponsored college degree on the site. I have been taking the majority of the steem dollars I earn and have been putting them to pay off my college loans. However with the recent drop in price of steem and for a few other reasons I will list below, I have stopped powering down. At this point in time I see the better option to wait and hold my steem power as it grows. The passive income I was getting was nice, but I think long term it will be much better to wait, here is why.
Interest Rate On Steem Power Is Falling Fast
If you don’t know this, you are actually paid interest on your steem power for holding it in your account. The interest rate when I first started was around .075% a day, but now only a month and a half later is only around .058%. The interest rate on steem power is falling which overall is going to lower inflation and the selling pressure on steem in the future. If you are worried about the price of steem falling in the short term, hold onto your steem power until the interest rate goes to nearly 0% and we will see less selling pressure. This is because the amount of steem being created is getting smaller, so there is less to drop on the market , also in my opinion people will want to vest now before it costs more steem power to do so and they could get the interest while waiting.
Amount Of Users And Transactions Is Growing At A Steady Pace
We are now, at the time of writing this post, at around 78,000 users and growing. Every new user that is brought into the eco system puts potential buying pressure on the steem currency so they vest it and can earn curation rewards. We have already seen a few users buy massive amounts of steem and vest them to gain a more powerful account for the future. I think it is a matter of time until more users start to do this as well. Obviously as long as the price of steem is falling there are more willing to sell than buy, but this could quickly change. I was always ready for a price correction after the huge spike up to $4 and my target is still somewhere around 50 cents per steem just because of how much of a supply is being created, but I don’t have this outlook for the long term.
I Am Finally Seeing Tangible Curation Awards
Early on as a minnow, it was sort of hard to justify holding onto my steem because the main point I would do so would be to get curation rewards , which at that point were non existent. However as my account has grown into more of a dolphin, I have now been able to get a steady stream of curation rewards which makes me feel like im part of the community regardless of how much I am making. Being able to upvote people even just 20 cents feels intuitive and Im not looking to give that up any time soon.
Developers Are Hard At Work Making Changes And Being Involved
Finally what might be the most important reason why I am no longer powering down is because I see the developers working and engaging with the community to make the experience a better one for all. Rather than just cashing out and leaving, they are staying for the long term. Sure they have to cash some out to pay for expenses and salaries, but it doesn’t seem like it is a race to the bottom for them like many others have stated.
Together these are the reasons why I stopped powering down and wont power down any further in the near future. Overall I think that if I continue to power down my steem power I will regret it in the long run and I see this as only the beginning for steem, and those who hold their steem power will be rewarded. I will still continue to use my steem dollars to pay for my college loans, but it does not mean that I am abandoning the system at all. If you guys have your own reasons why you aren’t powering down or why you are, leave them in the comments so we can discuss it!
-Calaber24p
Image Citations:
The graphs are from steemle.com and were screen capped by me
Final image is a screen cap of a google hang out with the developers.
The first image was created by @ tuck-fheman, quote is by @fyrstikken.
This is very interesting. As I am totally new, the more I can read opinions like this, the better to become more informed.
Wouldn't we see less selling pressure if the interest rate was going up, not down? Providing more of an incentive to hold steem instead of sell it?
No, when interest rate goes up for USD, there is more incentive to hold on to USD rather than an alternate currency (gold, cryptocurrency, etc) Therefore selling pressure is expected. In terms of trading environment, many traders are actually borrowing USD to trade thus when interest rates go up, they will need to reduce their holdings in order to reduce interest payment. This in return causes all other alternate currencies to go down in value. In BTC case, it is a bit different and conventional economic model does not apply to BTC because majority of the users of BTC are in a form of shady business or another.
The underground market supports the economy of BTC thus this is why you see quick recovery whenever there is a spike in sales volume. The drug lord and cyber scammers will not allow the BTC to drop too much in value as most of them are using it for 'business' purposes.
In Steem case, it will still take many years before there is wide support for it. Remember Rome was not build in a day.
Youre correct, as far as you go, but failed to address the point of the article.
Interest has not gone down, it is going down if you want to compare it to a RW interest rate situation, imagine you had an opportunity to invest in a 24 month CD. The interest rate was .075%/day.
If you then learn that the interest yield on the CD is going down to .058% a day in a month, then even lower, the CD does not become a more desirable investment, it beccomes a less desirable investment.
That is to say that no matter how much an X% SP interest rate is encouraging people to hold steem power right now, a lower percentage interest rate will encourage them less in the future.
Of course, this is a wipe right now, but as an incentive to hold for 24 months, it just doesn't track.
Exactly to the point. Thanks for point out areas that I have missed. This is a classic bond investment scenario whereby you are anticipating interest rates to rise thus bond value to fall. The future value of the steem value is taken into consideration in this case. Does the classic formula of FV= Cashflow at period zero x ( 1+R) n still possible to work to compute for steem in this case?
Yep, why would lower interest rates make anyone more likely to hold?! If anything, as interest rates drop so does my desire to hold steem
Because there will be less SP being generated as the interest rate falls. This reduces dilution which is generally viewed as a good thing.
High interest rate, high dilution
Low interest rate, low dilution
These forces are a yin and yang on each other. Both cases are an incentive to hold if you believe in the social media platform. If you don't believe in the platform, it would be wise to cash out. STEEM is nothing without it.
If interest rates for SBD are going up, I think this makes more of an incentive to hold onto it.
the topic is Steem Power, not Steem Dollar (SBD). steem dollar interest is already set at 10% per year.
That is definitely one way to look at it, im personally looking at it as people are going to be buying steem to vest while the interest rate is still high so they will have a stronger position when steem becomes based more heavily on curation in the future.
@jcornel ur right.... If interest rates are going down that is less incentive to hold on to the currency.... Its like the fed lowering interest rates to get you to buy more stocks..... Ultimately like anything else this is a market... We will see people that dont understand that cash out and other more competent people will power up and u will see the content change from people who got the steem for free to people who bought cheap after the technology proves that it works...
Nice post @claber24p I dont have so much steem power like some writers, but i invest my own money to buy. I was buy way more expensive then its now, but i really dont mind. I belive to steemit and i know its best to power up for future.
I don't plan on powering down in the near future because the community is still no new. There will always be problems when a startup begins. Seems no matter how much planning one does, there will be issues that no one anticipated. I see you are also citing your sources. I have noticed this is a task the community is trying hard to accomplish with each posts. I think it really speaks to the honesty of many steemit posters to give credit where credit is due! Nice post.
I wonder how many of us are recruiting new Steemit users via our existent social media networks. I haven't started doing that myself, even though I have had a pretty good experience with the platform since I started.
The more users, the better all our Steem Power will be valued. I think calaber24p has made the right decision to hang in there.
I have been doing that for weeks and quite a few people have followed.
i have personally brought a few friends here, but I also think we need to change a few things to make the new user experience friendlier. Ill probably be doing a post probably at some point regarding that.
Yes I have not only done this, but also personally walked two friends thru the whole process yesterday, and my one FB link today was an article combining encouraging ppl why to get on with a "don't worry about the price going down" post. It's a great time to be getting in, and especially buying if you can afford to (I'm using Coinbase to get $25 worth of Steem as soon as the transaction clears).
So . . . . I've recruited the wife, my father, son & daughter-in-law, daughter and a co-worker. The son hit with a $250 post yesterday :-) Given that this should make a lot of money in the long term, don't you want to bring family and close friends in early? Yes, I am taking some ribbing because the price of steem has dropped -- but the $250 post has pretty much stopped that :-) I've also got a bunch of money parked in bitcoin until the price of steem levels out, then BOOM!
That's what tons of people are doing, and that's why steem is falling so fast. The problem is, when it does go boom, you're only going to have mere minutes to buy in at the bottom before the price rises. It makes a lot more sense to "buy some on the way down", because you never know where the bottom really is..
Nice article, but the problem is not the creation of new Steem at the moment... the problem is that the whales are powering down big time and selling the stake at any price... each day some whales get access to their powered down holdings... so this sell pressure will be there for 2 years and makes up around 90% of the supply. Not very much enticing for investors to buy in... Every day they wait it is another 10-15% cheaper... so they wait complacently...
If I understood Steem correctly, interest rates on Steem Power are never going to fall to zero as 90% of newly minted steem will always be distributed among Steem power holders, and every year the amount of Steem will double through mining.
Great post. My personal Steem Power philosophy is...
maybe finish watching that episode.
@calaber24p
I see no reason to power down either but seeing how celebrities pulled their SD out makes me a bit worried about the future.
I don't make much and I am already involved in promoting the community but we are surely long way to go until this is safely moving upwards
this makes no sense at all. if the interest rate for powered up Steem Power is to fall what's the point of powering up? might as well leave it powered down.
you're saying in 1 month the SP interest rate already fell 15%...and it will fall to 0 soon? who's deciding this? the deal was always if you powered up you'd get a a return in Steem..
Steem is already unattracive as it is as only buying a huge amount can actually bring you in the curation game. for the smaller investor powering up interest rate was the only attractive proposition.
the problem with Steem price is the ones powering down not the ones who keep powered up. if anything all interest should be removed immediately from those powering down (for some reason they still receive interest).
great article, and is that a picture of YOU ? If so, you're a doll, truly adorable.
being super nitpicky here, insanely so perhaps, but I don't think you've been "powering down".
You simply been withdrawing SBD, not SP.
I think "powering down" refers to your account called SteemPower.
Your SteemBackedDollars are immediately useful to you. You decide if you want to add them (deposit) to your Power. Or transfer them to SteemDollars, or to an account on an external exchange (or Dan's own exchange called OpenLedger).
Transfering your SBD off to someplace else - pretty sure about this - doesn't affect the effect of your voting power. I think the voting influence is strictly from the Steem Power you have... which, can't be withdrawn immediately.
Please somebody correct me if I'm off.... otherwise than the usual 'being off'
HA ! {8^P
No that is not me haha, im a guy, but I have been powering down , I just stopped today. I was doing both sbd and steem withdrawals and putting the money towards college loans, but I decided to hold onto my steem power for the future. SBD does not affect voting power, only vests do, which the amount of steem power you need for a vest varies from day to day.
good to know I can stop drooling...
or can I?
Would you like to play a game?
I feel that someone with as many followers as you could help steemit grow immensely while providing a nice incentive for people to go out and explore.
what do you think?@calaber24p https://steemit.com/steemit/@echoesinthemind/the-game-proof-of-concept
Interesting insight. I learned a thing or two from your post, and might have to do the same and perceive it as an investment more than I thought before.
Nice article! When are you thinking would be a good time to start powering down in the future?
I have also since I've joined only been powering up and spent a lot of my SD rewards into more SP. Bought most at 2-3$ so it kinda annoys me now not being able to buy sole cheap ones, but soon I will be able to start buying some more from own pocket. My goal is to wait for Steemit to either reach 10 million users, stable 10 USD/coin before powering down and once I do stay active so the rewards keep building itself back up while divesting.
As I am learning more everyday about steemit I agree that holding as much steem as one can is the best plan in the long run. Thank you for the informative article.
I'm with you on this, and still powering up with every piece - whether it earns a few cents or a few hundred dollars. I think it's short-sighted to bail on a platform that's got such potential and is still SO new. My goal is to eventually use my earnings to cover any gaps for my kids' education - and once that's done, replace my old Honda :) Got my eye on a Hyundai Santa Fe (woo hoo! right?)
Totally agree. It's not just a good time to hold, but to use a little fiat currency to buy. If buy low sell high can be trusted anyways. It's a new thing, still in Beta, and most likely bound to go up.
I'm relatively new to this site, reading pieces like this are very helpful to me.
Just like you I hold my Steem Power. I think we should continue to work on Steemit and think of money in the second place. Before Steemit I happily posted in Facebook for free. Why would I worry now? It's just a matter of time until Steemit goes mainstream and we will see the price rise
Good article. I think you're right, relax and stick with it for the longterm. Followed.
nice choice. interesting to read. i enjoy it
correct me if I'm wrong but:
The inflation for Steem is set at 200% for the 1st year and 100% for every year there after.
out of all the Steem created 10% go to those holding Steem Dollars and 90% to those holding Steem Power.
Therefore Steem Power should have an yearly interest rate of of 180% for the 1st year and 90% there after .
Great you thinking! totally agree with you
CRAP! I wish I read your article this morning.
I've never powered down before and because I was curious, I hit the button this morning. Now I'm doubting my decision.
I guess my biggest question about powering down is: how does it affect my vesting shares? I learn by doing (and/or making mistakes). While I'm certain I didn't 'harm' myself, my goal is to invest back into the community and I want my votes to count! I guess this is a classic example of ignorance is not bliss. :(