This might seem like a very odd comment considering the present state of things. It is easy to hone in on where things are at and embrace that as what will be going forward. However, the key to long-term success is the ability to spot trends either before they start or as they are just kicking off.
When it comes to STEEM, there is no doubt the trend is to dump. This is something that is no surprise to anyone. It is reflected in the price of the token causing people a great deal of worry. There is, however, an perspective that is very important.
One of the biggest issues with the dumping is that this is being led by the applications. At the head of the class, of course, is Steemit Inc. The company is unloading somewhere around 800K STEEM per month. This is a hefty number yet we could live with it if they were the only ones doing it. Sadly, almost every application is doing the same thing to a degree. On his weekly show, @exyle asks each guest who is tied to an application if they are selling STEEM. So far, the answer is always yes.
The key point here is the reason why they are selling STEEM. It is not because they are down on the platform or have a negative view of things. The STEEM is being sold simply because they need the money for operations. Their present business models do not bring in outside resources leaving them dependent upon the payouts from the blockchain. This, in turn, gets dumped to pay for development and server space.
As you can imagine, each of these entities requires thousands of dollars a month (in Steemit's case, tens of thousands). With the price under 20 cents, a bit of simple math shows the numbers get rather large quickly. Tens of thousands of STEEM being sold is not a big deal until you consider it being spread across a couple dozen applications. Add in the selling pressure from individuals, and it is easy to see why the bear took a bit bigger toll on STEEM.
That said, there are signs of a reversal. I see two applications that are starting to soak up STEEM. It might not seem like much at this time yet it is a beginning.
This is an investment club that I wrote about a couple of times. It started a couple months ago and proceeded to amass just below 25K Steem Power. This went from nothing to a fairly powerful Dolphin in about 7 weeks.
It is a project that kept almost all STEEM received on the ecosystem. Outside a 50 STEEM purchase of Bitcoin, everything remained on-chain. Also, for the foreseeable future, most of the moves are going to be putting the SP to work on-chain to build up that aspect of the project.
The key factor in this is the ultimate reach of the project. SPInvest has a token (SPI) that is listed on Steem-Engine. The idea is that the token is backed by the total value of the account. Tokens initially were being sold at 1 STEEM apiece. After the first 10K, that price was moved to 1.1 STEEM. When the 25K level is attained, there will be another jump in the price.
There are 1M tokens available. What this all means is that, over the course of the next couple years, the amount of STEEM tied to the attainment of the tokens will be a lot more than 1M. Ultimate, there could be 1.5M or 1.75M STEEM spent to buy all the SPI.
This, of course, does not include the STEEM that comes in the form of rewards. Right now, the basic use case for the SP is to lease it out. Thus far, over the first two months, an additional 1K STEEM was brought in. This was powered up (with a slight amount in savings) to be leased out also.
Certainly, while impressive, a project with 25K SP is not presently doing a great deal to alter the token distribution. Nor is it soaking up enough liquid STEEM to have a major impact on anything that is taking place.
However, if you consider the project holding 2M or 3M SP, then you are looking at something holding perhaps .5% of the total STEEM available.
That would make it a very large Whale soaking up liquid STEEM on a daily basis.
I was caught by a report put out by @penguinpablo this week. It was the weekly article about the amount of STEEM on exchanges. A few weeks back, I notice Steem-Engine was being put on there which I found interesting. This week, I paid closer attention to it than I did recently.
At present, there is over 900K STEEM on the Steem-Engine platform.
Now, I must make clear, this is still in liquid form. The STEEM on SE is not powered up. This is still in the liquid pool and can be sold without delay.
There is a twist though. This STEEM is used as the backing for the STEEM Peg (STEEMP) on that exchange. Therefore, the STEEM cannot arbitrarily be sold by the platform. Instead, it is individuals who will decide what is done with it. If a large group of people convert their SE tokens, which are all paired with the Peg, and then move them off the exchange, there will be a decrease. However, with all that is happening, it appears the trend is in the other direction.
Notice the trend over the three month of data. The jump is very impressive. Basically, SE is soaking up 300K per month. This is a bit more than 1/3 the amount that Steemit Inc is dumping.
Once again, we need to put on our futuristic hats and envision Steem-Engine a year or two down the road. What will the situation look like with NFTs and Security Tokens, both of which are on the road map? Will Steem-Engine be holding 5M STEEM? 10M? 20M? Here again, we see one project that is accounting for more than 1% the total STEEM available.
Here are a couple projects in operation right now that are eating up STEEM as opposed to dumping them. The key here is to see the reversal of the present trend. We know Steemit Inc is going to be selling for a while. They admitted as much. However, there will come a time when other applications will help to alter the trend. What happens when a dozen applications are soaking up STEEM instead of having to sell? How will that alter the amount that is on the open market?
There is another elephant that is also going to be very hungry.
Smart Media Tokens
Many commented on the similarity between SE and SMTs. While there is a difference, the concept of there being some redundancy is true. This will be worked out over time yet it does mean the same principle that applies to Steem-Engine also goes for SMTs.
SMTs are going to be traded on the internal DEX. This means there will not be a peg like with SE. However, there will STEEM needed to provide liquidity. This has to come from somewhere.
Thus, someone, or a bunch of someones, will need to bring STEEM to the table. We could see a market maker created (or a few) that is funded with STEEM and provides the liquidity, trading in and out of tokens throughout the day.
The other option is for the community to show up with STEEM. Whether you want the token of the NY Times, Huffington Post, Sally Smith Homesteading, or whatever else is on the exchange, you best bring STEEM.
In a short period of time, we saw a few hundred different tokens show up on SE. These are all outlets where people can "spend" their STEEM (actually STEEM Peg). We will see something similar, I imagine, with SMTs.
If we look at things from this perspective, it is easy to realize that the 120M liquid STEEM that is out there can get soaked up rather quickly. This will have a significant impact on the pricing, at least in terms of the tokens paired with. Of course, we see this in any market where the heavily active assets have tight spreads.
It is worth watching what is happening with these two applications I mentioned while also seeking out others that might fall into the same category. When a fair number of applications start swallowing up STEEM as opposed to selling it, I think the price action will get a bit crazy.
With all that is going on, we can see many perspectives which show there is not a lot of STEEM out there, overall.
The desire for STEEM could grow very rapidly.
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