Before I begin I want to say that I am only going to look at the changes that I think are going to affect the supply or demand of the actual currency in a big way. I will give my prediction on what I think it going to happen, but take in mind I could end up being completely wrong. President Truman once demanded out of frustration, “Give me a one handed economist” because on one hand something could happen and on the other something else might happen, this is the nature of economics. There will be more than one force at play here, so predicting which one will win out especially long term is extremely hard and mostly luck based.
I will start off saying that I think the proposed update is a very good step forward and addresses many of the problems that have been causing the Steem price to fall recently. With lower payouts and a lower Steem price, we have been seeing less people wanting to take part in the platform and think about investing. This is a chicken and the egg problem in the way that we need some higher payouts to attract newer users which would have them invest and raise the Steem price, but in order to get those new people we need a higher Steem price. So the steps that are being taken to address these problems are definitely in the right direction. I am going to skip the effect steem dollar conversion, miners and equihash changes will have mostly because I don’t know if they are going to have little or any and I know too little about the changes.
First let’s look at the new cash out period which went down from 102 weeks to 13 weeks. Many see this as a massive problem and think it will tank the Steem price as everyone will dump all they have immediately, which could potentially happen but I think that something like the scenario I am about to explain will more likely happen. I think in the short term, we are going to see two types of people. The first type is one who will cash out Steem immediately, and the second type is someone who thinks the price is too low to cash out so will hold for a period of time. I fully expect the price to fall in the short term, but once that Steem has been accumulated on the market at low prices, the lack of an increased supply will raise the price. As I believe Dan mentioned, people are more likely to power up their Steem now as well because they don’t feel like they are trapped in a system for two years, which in crypto time can mean the end of a project. I think that overall this is a very positive change.
Next let’s look at the drop of the inflation rate, which people almost universally think is a good idea. In the long term it will lower the supply substantially and lower the effect of people cashing out on the market actually have. However, that being said, the drop of interest paid on accounts that power up Steem also lowers the incentive to hold Steem power at all. The good thing is , there will be a sort of pressure on those holding large amounts to produce content or curate if they want to keep the amount they have. There have been many early investors who haven’t even engaged with the platform for months and although they will probably be the first to cash out, the platform’s steem power will hopefully become more distributed amongst a larger base. Overall I think lowering the inflation is a big incentive for people to invest into the system because the selling pressure will slow down immensely.
Finally let’s look at the new changes to where the inflation actually goes which is 75% to curators and authors 15% to Steem power and 10% to miners. Im not sure what the previous breakdown was, but having the bulk go to content creators is definitely what we want to do to raise demand. If new users see the amounts of money that some of the content creators are making, they will either join the platform or cross post their articles to our platform as well. Being able to share these high quality posts will bring in new users organically. And raising the post amounts will keep content creators here as opposed to elsewhere.
Overall my prediction is that in the short term (1-3 months) we might see a price drop, but after that point if we can continue to bring in new users and content creators the price will raise as the selling pressure will be lower and many of the early investors that have been doing nothing but cashing out will be gone. Getting rid of the sell pressure and controlling the inflation for those cashing out is in my opinion the most important change that this update will provide and I think long term is the best way for the platform to survive. Im here for the long haul, I won’t stop making content, so you don’t have to worry :)
-Calaber24p
Note that im not really sure where i stand on the changes. At this point, i don't really have a ton of skin in the game. That said, take the following observations for what theyre worth:
But aren't those precisely the two types of people we have now? The people who are powering down and cashing out as quickly as they can, and the people who are holding in hopes that the price goes up.
The only difference is that the people in the first category are going to be able to power down and sell about 8 times more quickly. I can't really see how these changes will convert people from the first category into the second category. with decreased steem power incentives, the people now powering down and selling are going to have less incentive to change their mind than before.
This is possible, but keep in mind that youre talking about a big supply shock. Potentially increasing the supply of liquid steem on the market as much as 10 fold in a few months (this from the chart posted by steemit blog)
This could be like ripping a bandaid off -- a (relatively) short period of pain followed by a recovery. Or it could trigger a liquidity crisis where there are not buyers for the steem hitting the marketplace at any price. We're talking about a currency thats already lost 95%+ of its value. The value decline precipitated by a massive supply shock might be sufficient to convince the marketplace that steem simply won't be able to pull out of the downward trend.
potentailly exacerbating this, Im sure that there are many who will characterize these changes as a default. Im not sure whether i would agree, but when you combine the accusation of default with the reality of rapidly declining prices, it makes for a compelling argument.
Also, im not sure content is going to get more (in actual dollars) because of the change. Yes, content will get a greater percentage of the newly created steem, but far less steem is actually going to be created. So kind of a larger piece of a smaller pie type situation, if im understanding correctly, right now conent creation and curation get around 7.5% of total created steem.
If im understanding correctly, under the new system they'll get 75% (10 times as much) of an amount steem being created thats 1/10th the amount. it seems like a wash, no?
You were fairly right about Steem's price right from the early days, and I'd buy into your argument on the fundamentals :) Glad you'd stick around for the long haul!
Thank you for sharing your analysis. :)
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thanks for your good posting.
upvoted... ^^
Great post!
I am still learning all this #crypto and #steemit stuff but things like this, help me understand. It remains to be seen what actually happens.... but these ideas and tutorials some of us newbs can understand is nice.
I really appreciate the post. Thanks a lot.
This all sounds good to me , I really hope your right! Im also here for the long haul and I really do believe in the platform , and nothing but the best for steemit their future is looking pretty bright! ! Thanks for the information its much appreciated! STEEM ON ! ♨👍🖒♨
so what does this mean for someone like me that started a couple months ago. I don't have a lot of steem power so I don't have much voting power. So if the ratio is more for curation and less for authors and whales cash out then who is curating content that have big amounts of steem power?
I am on the same page as you with expectations for this coming update. I think in the long run this will be very very good.
I like how the shift in focus is from Steem Power holders to content creators.
There is actually more incentive to power up after the changes because the more liquid steem the more "interest" for people who are powered up.
The 3 months withdraw period means there will be a lot more steem that are not powered up and so the ones that stay powered up will receive more interest.
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Don't underestimate early investors. They are not naive and know when to sell or buy. Or hold and wait. That's why we call them investors.
Does anyone else know what the previous breakdown was? Would also be interested to know what the split between curators and creators is. Thx.
Good points and thanks for the summary of changes. Lower inflation and decreased payout time (102 to 13 weeks) are steps in the right direction. The good thing about @Steemit is that it's an evolving entity that can keep improving to see what works best.
Good analysis, thanks. I'm going long term with steemit. I definitely believe in it. Time will tell if we are on the right track.
Thanks for explaining! I'm new to Steemit, had already bought some Steem, wasn't really shocked by the price drop. It's not unusual for cryptocurrencies, or government money for that matter.
Less inflation and lower interest, sounds good. But maybe they could have done more to spread the wealth, in return for the lower inflation which benefits whales the most. At the end of the day, the whales need the community - without users, their coins would be worthless. The community doesn't necessarily need this version of this open source project.
Do you think the Steem Dollar peg is tenable, even with the new limitation? I think it was a bad idea in the first place. It offers a false sense of security and it seems to put downward pressure on Steem itself. I don't know how much I'll receive before I post an article, so it doesn't really matter whether the reward is shown in dollars or in a coin with unknown value.