Be careful investing in Steemit if you haven't done your due diligence first, better idea to use as a free account first!
In January 2018, I joined Steemit and deposited $3,900 into my account as Steem Power thinking it would give me larger influence and help me make more money.
70 days later after continued hard work and powering up earnings back into more Steem Power I am still down with a loss of $2,300 and getting worse by the day. Of course, this is mainly because of the fallout in the crypto markets themselves, however there are other factors to consider and be aware about as well including dilution. You should know what that is and how it works before investing money into Steem Power on Steemit.
Here is what I've learned during my 3 months of using this platform and through the research I have done:
1.) STEEM the tradeable cryptocurrency is diluted daily. This means more STEEM is produced and released to the markets daily causing a higher supply to be available to the markets and thereby continuously reducing the value of the cryptocurrency.
2.) To counteract dilution you need to be active every single day in the community and earn more STEEM, SBD or SP every single day equaled to or in excess of the dilution rate just to break even. You can also do this through earning through Delegations of SP for passive returns. However, if you do nothing and just let you Account sit idly then you will lose money or value of your account every single day just to diluation, independent of changes in the market.
3.) As time goes on and more and more dilution occurs, the less and less likely it will be to see highs in the value of the cryptocurrency as with when the markets were up as high as almost $9 for STEEM. The amount of STEEM available to the market or the Max Supply doubles every year. Therefore, the highs of $8.57 will be long gone and out of reach very soon if they are not already...
4.) Combine the negative effects of just trying to keep up with dilution with the fact that the markets have dropped drastically and you have a receipe for huge losses.
5.) If that weren't enough to scare you away from investing, here's one more big one to consider....Steemit arguably shares a small characteristic in a way, to a Ponzi scheme in the sense that it promotes itself on the possibility of easy or passive forms of income in exchange for your investment into Steem Power only to lock your money up for an extended period of time at which you cannot access that money or withdraw that money. Presently to my knowledge it takes 13 weeks to be able to incrementally get your money out of the account. You can withdraw any time from STEEM or SBD but not from SP which is what you need to seemingly have any ability to make any money at all on the platform.
With traditional securities or cryptocurrencies you can still make money in a down market or at least have the chance to through shorting stocks, Bitcoin, whatever and/or by day trading / short term trading where you capitalize in small shifts in prices to slowly increase the number of shares or coins that you hold seemingly just by selling at a daily high or close to it and buying back in over the next couple days or so as the prices creeps back down a little and repeating this cycle numerous time over a long period of time.
While holding Steem Power you cannot do any of those things and are seemingly stuck and forced to ride the wave downward toward large losses.
The amount of money that you need to invest or view it in terms of the amount of money that you need to hold in Steem Power just to make a few cents is horrifying for most. The system benefits the largest of holders and Witnesses who are guaranteed a 10% return on any new blocks of STEEM they produce which makes dilution less of a concern for the largest influencers who achieved Witness status.
Also, think of dilution in a sense that the money that you are losing or the value that you are using is the money that is being used to pay for the rewards that other people receive for authoring posts or curating posts. So you are essentially paying a daily fee just to be a part of this community.
It's for all these reasons and more than I would caution any average person that doesn't have much money to lose or spare to steer far clear of investing in Steemit or Steem Power unless you REALLY know what you're doing and you have a significant amount of time to devote to posting multiple posts daily and curating or you have a massive following that can sustain meaning earnings on your posts.
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STOPSTEEM has a fixed supply of 255,556,473 STEEM and a Total Supply of 272,530,567.... You got in at the latest peak of crypto... if you invested the $3,900 in the beginning of January 2018 in practically anything listed on coinmarketcap you would be suffering a loss right now....
This is direct from the Steemit Frequently Asked Questions (FAQ) website. See link below. Steemit puts this information out there for you to read, it's just that most people don't understand what it all means. The max supply will continue to increase each year.
https://steemit.com/faq.html
Interesting. It seems I was misinformed.. I always thought SBD was inflationary whereas STEEM has a set supply .... but regardless I stand by my statement that if you invested in any of the top cryptos in early January 2018, you are facing serious losses right now...
As more users join the platform, the reward pool should get diluted and the price of STEEM should increase...
I don't disagree with you on your statement about any crypto investment being down right now by any means. I just don't believe people should put money into this blindly without really understanding the risks first. I'll continue to stay active on here for an extended period of time to see how it goes. Maybe it will turn around one day. One thing I know for sure is that I need to be active daily or else I'll get hit by dilution.
thanks for sharing that very relevant observation. it greatly helps
The dilution issue always nagged at the back of my brain. Thank you for so eloquently fleshing out what I couldn't put into words myself. and now I'm sad.
Isn't the whole point to earn rewards from your content, not day trade?
But the rewards are miniscule and do not justify the cost and buying into Steem Power, which is the whole point of my argument. The rewards are often not enough to cover even the cost of dilution let alone profit unless you have a huge following or large influencers voting on your content or are using services to help gain you additional votes in some manner.
Just because your content isn't popular enough by your standards to be worth it, doesn't mean it's not for others. Also, we are in the infant stages, not many dolphins and whales swimming and following and upvoting. Wait for it. While I understand this "time of crisis" scenario, it's also the extreme case, and a case where crypto won't help you. The point of money is to purchase and acquire assets, in my opinion, we have lost touch and have this idea that money should make it's own money and withhold thru some type of crash scenario. Trust me, that day, money won't matter. Seeds, water, land & lead. Money just sitting, shouldn't be a store of value in and of itself. All your fiat currencies do the exact same thing thru inflation, they just don't teach the dark side of that situation to most.
The other argument isn't necessarily about day trading but moreso on the fact that in bad times you can't even get your money out of Steemit when you want it, you have to wait 13 weeks for it to be slowly returned to you and risk further downside.
It was a risk you took and it didn't play out well for you. The whole point of steemit was to earn reward from content and your comparison to trading the same amount of money you had investment is kind of out of order. Still if someone invest such money when there was a dip in the price of Steem, am sure he would also be telling a complete opposite story to what you are saying. Don't get me wrong, all you ve stated are true but you got it wrong were you thought and also likened steemit to an investment scheme. It's not and it will never be. You took a gamble and it didn't play out the way you had expected. The market is very unstable at this point with the launch of Smt, if Steem gains more value in the future I hope you put up a similar post saying how your investment paid off. Peace!!
The moral of the story is it was a risk I took blindly not realizing the downsides of dilution, so yes, shame on me for not doing my homework, but it's still extremely hard just to pace dilution let alone not being able to take my money out as I please.
No shaming on you, guess it's an experience you learnt from. Secondly you are judging base on the facts on ground now, alot can change in the next 3-8months. Cryptos are like that. Look to the long term and you could be pleased you did what you did.
You buy in at the worst possible time and then blame your losses on inflation? There is less than 1% inflation per month here.
Like you, I also got super excited for crypto when Bitcoin hit 20K. Unlike you, I knew it was going to crash into the dirt. I've been swing trading in a bear market for months.
It's not fun but you've literally been here 3 months. Make this post after a full year has passed. You won't be able to because it's going to swing back up again; likely in the summer time and then again in Dec/Jan
EVERY cryptocurrency did the same thing. There was no safe space except to keep your money in fiat.
I've been swing trading my other cryptocurrencies in this bear market as well with some success, which you cannot do here when your money is locked up in Steem Power. The point of this is to educate people on the risks of locking your money in Steem Power on Steemit which a lot of people that aren't into the minutia do not realize. If it recovers later in the year then great, it's not like I can easily take my money out anyway so I plan to let it sit. But I'd hate to see others lock their money up here thinking it's a quick money program because it's not and you have to be extremely active to see any benefits from it at all.
You don't have to be active at all. Sell your votes to a bid bot and the bot will pay you.
It's true there are a wide variety of risks and it's good that you're trying to spread the word about them. I just think you're going a little overboard because you personally got burned.
Personally I think Vested Steem Power is one of the best things about Steem. It's nearly impossible to steal because of the account recovery program and it evens out the market and makes proof-of-stake a reality.
Again, the point is to educate the average user. I'm sharing the information and experiences that it's taken me 3 months of being on the platform to realize. Are you getting offended because I pointed out the fact that having your money locked up is a comparable feature to a Ponzi scheme? Had I of omitted that would you have had the same reaction? It seems that you're taking something I said personally so what part exactly is it? If it's that offensive to you I will remove it, in all seriousness.
It's not offensive at all, but if I were going to explain this platform to new people I'd be stressing other things like Proof-Of-Stake. Telling people that this platform is proof-of-brain is ludicrous and makes people super angry when they find out it's not. Users will get out of this platform what they put in, and most users expect to put in very little and get out a lot.
This can't be a platform you just randomly sign up for after listening to someone like Jerry Banfield pump it on his various channels thinking you're going to make all kinds of money. You have to truly understand it and how it works.
The full article talks about combining the effects of market declines with the effects of dilution. Dilution is the main focal point because it's the piece of this equation that is the least known. Everyone knows the markets are down but not everyone realizes that their also losing money to inflation too at the same time.
You invest in a wrong time.. Thats what you call wrong timing. Better luck next time bro. But just keep steeming. There's always a sunshine after the rain. 😉
Thx for another informative post. Easy to read.
I didnt know some of those informations. Powering up seem to make sense if you're really want to build your presence and have some influence and reach. There are better ways to make money.
Please continue up with creating interesting content - it may be hard at the beginning to build reach and solid followers base.
Steemits needs solid content builders so just dont ever give up! :)
great post by the way. im still learning. so basically like you said to spend significant amount of time posting multiple posts daily? few questions please.
your advice appreciated in advance
Vote somewhere between 10 to 20 times per day to increase your odds of receiving curation rewards. Spread your votes out throughout the day to try to get your voting power up in between votes (the higher the better). Unless you have a high value upvote from having a lot of Steem Power don't waste your votes on your own posts. Trying to vote early on posts from users that generally earn a lot on their posts or vote on posts you find that have a lot of money earned already with a relatively low number of people that have votes on it so far because in those instances it's likely someone paid for upvotes and you could get some of that if you're in line for curation rewards. It's difficult to say on the posts because everyone has different strategies. You can do whatever you please though on Steemit.
Thank you so much. Great advice. You rock Johnny .xxx
