So I've noticed that Steemit is kind of "dead" or slow. I know of at least one account that commented that he's not getting the votes like he used to. Well, the price of Steem and SBD has been going down, in sync with the price of Bitcoin. Steemit tends to get slow when the price is low. It would be nice if altcoins could be an independent asset like they were meant to be, but until we can figure out how to break that synchronization, it's going to be tough to grow Steem.
But that's not why I'm writing this article today. I'm writing because I'm betting that Steem will continue to rise through another process: transaction demand. See, for much of my time as a crypto investor and Steemit author, I've seen Steem and other currencies rise as as a result of speculative demand. This works fine for awhile, but I think it's unreasonable to expect that coin prices will go up and up and up on speculative demand.
For one, volatility is bad for business. Second, in order to have a useful currency, it must be stable. The introduction of bitcoin futures has, from all appearances, put the kibosh on speculative demand for bitcoin and it would follow, every other altcoin. It's important to understand that the people who created bitcoin futures were looking for a way to short bitcoin and they found it.
Those same people come from big hedge funds and banks. They don't want to compete with crypto. They do seem to think that crypto is an inevitability, but the strategy now, seems to be to stop the speculative bubbles and the bitcoin futures have done that. I just don't see $1 million bitcoin by 2020 given trading performance since December. John McAfee may indeed have a most unsatisfactory dinner that year.
Those big banks are connected to the Fed. They can create money out of nothing. And they can use that money to short bitcoin, forever. And they're not going to stop. So the only way around that pressure, that incessant beating on crypto by big banks, is to create transaction demand for our favorite coins. That means demonstrating use cases and actually using it for transactions.
For Steem, the easiest way to use it is to create content and post it. That creates demand for Steem and Steem Based Dollars. All of these currencies are very pretty, but unless they are actually used to buy something, to transact business, there will not be enough transaction demand to offset the short selling demand we're witnessing now. Bitcoin is again selling for less than $7k. Bitcoin has been trading in a very narrow range for several months now. And since bitcoin sucks for transaction speed, it will never develop the transaction demand that would make it rise against all that short selling. The price of bitcoin now has more to do with speculative demand than transaction demand.
On other hand, if bitcoin is stable against the dollar, then that would make it useful as a medium of exchange. I'm not even sure if the Lightning Network is going to save them. I've seen excellent arguments against the Lightning Network, so I am not very optimistic about the future of bitcoin. I consider bitcoin to be a proof of concept, not a medium of exchange.
Steem is faster. Bitshares is faster. EOS will be even faster. There are plenty of other coins that offer clear and demonstrated advantages over bitcoin. The only reason bitcoin is doing so well now is first mover advantage. Bitcoin is the first coin people think of when they think of crypto.
So how do we overcome speculative demand and create transaction demand? Apps. Look at the coins that have a blockchain with apps running on them. Those apps are creating transaction demand. Those apps are businesses running on top of their respective blockchains.
Over time, as developers start to think beyond apps for operating systems and phones, they will start to see the potential for making money writing apps for blockchains. As developers get better at writing those apps, transaction demand will build for other coins besides bitcoin. I can see that sort of trend happening with blockhains that can handle the traffic. But I don't see that happening with Bitcoin, Ethereum or even Litecoin.
I believe that we can overcome speculative demand for Steem and other altcoins. We can do that by just using the apps that run on the blockchains that underlie the coins. Here on Steemit, Busy.org, DTube, DSound, Steemgigs and many others that are still in development, we create transaction demand by using the apps. That in turn will help to defy the speculative demand that is depressing the price of Steem and Steem Based Dollars.
Altcoins have been trading in a narrow range for many months now. That has not only taken the wind out of speculation on altcoins, that has made them more stable. And that in turn has made them more useful as a medium of exchange. I guess the following question seems appropriate at this point to ask:
Would you rather see Steem rise on speculative demand or transaction demand?
I would much prefer the latter. The price of Steem is relatively low and is probably going to go lower. I am not deterred. I am going to keep posting. I am going to keep curating. I am going to keep commenting. It is always the right time to post on Steemit.
If everyone uses Steem to the greatest extent possible, then we create the transaction demand that will increase the price of Steem. But increasing the price of Steem shouldn't be the goal. The goal should be to earn and use Steem instead of dollars to create a functioning economy based on Steem.
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A basic guaranteed income in the context of Maslow's Hierarchy of Needs
A sort of political movie review: Star Wars: Rogue One
Happiness isn't getting everything you want - happiness is a skill
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Fate, impunity and altruism
Some people actually don't get that you get more steem when the prices are down with each Post then what you do when the prices are up because it is pegged to the US dollar so if you get $20 payout and steem prices are trading lower that means you get paid more steem. When prices climb you get less. So since that is vested it is better in the long run for it to be down. More profits to be made when it climbs again.
I like your very simple explanation for the relationship between Steem price and earning Steem on Steemit. Thanks for sharing it. :)
It is funny no matter how high sbd gets you get $1 for $1 in sbd payout but what ever Steem is trading at you get the value of that $ amount peg to the USD so the lower steem is trading for the more steem you get at payout. It can be confusing. @overkillcoin did an info graph trying to explain it.
Wow. That is a very cool find. I gotta read up on that later.
Thanks!
I'm with you. I plan to keep using the site during this down turn.
Me too
Write on!
Great post, as always. This is exactly why I’m learning to program smart contracts and develop dApps on different blockchains. I don’t know how long time it will take me to learn these programming skills, but I am making small steps every day. And hopefully one day I’ll be able to contribute to development of new useful dApps running on top of blockchains like Ethereum and EOS. Your post has just increased my motivation to get there!
Oh, cool. I now know someone who is learning how to build one of those apps. I will be sure to visit again to see how your projects are coming, if you share about your progress. Your apps will help to build the transaction demand we need to overcome the shortsellers and break the ties with Bitcoin.
And thank you for your comment and feedback. :)
Great and informative post. Especially for someone like me who just started in this platform. Kind gives me the reassurance that not everything is down in the crypto world, that there is something else to look forward to. I am kind of a late bloomer in crypto and I am really regretting why I didn't ride this horse earlier.
I'm glad you enjoyed it. I think with more posts like this, we can start to reframe prosperity in digital currency away from speculative gains and move towards transaction gains where real value is produced and exchanged.
Don't worry about being a late bloomer, friend. I used to wish I had bought a hundred bucks worth of Bitcoin when it just a buck or two each. It is still very early days for Steemit. So write on!