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Why SPS "Goes Down All The Time"

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@imno
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Let's talk about SPS and why it keeps going down.

If you follow the Splinterlands Reddit or go on the Discord, you'll see over and over again people asking the question of why SPS keeps going down. This question hasn't lowered in frequency since that first ramp to over $1 right after launch had its epic retracement back to Earth.
(For the record, I fully expect we get back over $1 within the next year if everything is managed properly)

At the time I'm writing this, it's actually up a little from a low of .19 a few days ago up to .27 amid today's crypto recovery post-Fed speech.

Every time I see it asked there is someone in the comments who pieces together some phrase that sounds like this "Any token that is given out daily is going to constantly go down in value. What do you expect?"

I'd like to talk about this for a second because ultimately it's not true. However, the actual truth is very important to understanding more than just SPS but the entire Splinterlands economy.

First, let me address why I say it's not true.

Supply increasing, even if increasing daily, only sends prices down if it that supply outstrips the demand.

The Yieldly Proof

Here's another coin I own that gives out daily rewards at an even greater rate called Yieldly. This coin came out a few months before SPS and I've been holding it since day one.

YLDY is similar to SPS in that you get it by having a different coin in your account (Algorand) just like you get SPS mainly from having DEC. You can also stake your YLDY and get staking rewards. Those rewards started astronomically high and come down the more YLDY is staked, just like SPS. Also, rewards on YLDY happen daily just like SPS.

Here's a chart of YLDY:

It actually took about a month for YLDY to get picked up by Coingecko so you don't see the initial ramp from .002 to .005 here but you can see, it doesn't just go down.It went up, steadied out, went up huge, came back down about halfway into a nice bullflag pattern where its now threatening to make its third major leg up. (Not financial advice)

Now to be fair, SPS doesn't just drop every day either. It bounces around and sort of maintains a floor in the low .20 area but its highs are compressing lower. It does look like it could be ready to break above that area right about the time when SPS staking could become more valuable though so...(not financial advice)

So why then do I believe SPS is more inclined to drop more than it rises while something like YLDY which is also given out daily, doesn't?

If you can understand the answer I'm about to give, you can understand the Splinterlands economy and what needs to be done to get it back on the right track.

When it comes to the financial side of Splinterlands, there are two types of players.

There's the person here for income. (Wage earners)

There's the person here for long term value. (Investors)

People who stake their Algorand to get YLDY are of the investor mindset. They are in it for the longer term value. The expectation is that over some amount of time, the value of what they have is going to increase so they will hold onto it unless a better deal comes along.

In splinterlands though, that makes up a very small percentage of players. Many players might dream of becoming a whale one day but what they actually do is play for income. When they win a card they immediately put it up for sale. When they get SPS they cash it in.

Many do this strategically. I mean, if you want more SPS to cash in, it's actually a great idea to hold DEC which has a better SPS payout rate than holding SPS does.

Also, they may buy a card that will help them win more and farm more income overtime. And in buying that card they are probably thinking about the fact that its price could go up in the future.

So it's not completely just play, win, cash out. If it were, those people would never get any SPS to cash out of anyway. But in most humans minds, we do things for the immediate reward. We aren't investors, but wage earners. And when we get our wage, we spend most of it while hopefully putting a little bit away from later.

That's what splinterlands is. And this is why the whole value of the game revolves around rewards being worth playing for.

As soon as the idea of immediate pay off ends, the core players of Splinterlands become less active.

And if investors don't see the core players maintaining activity levels, they don't invest.

I say this because I've had SO MANY people tell me now that by looking at the state of daily rewards as an indicator of longterm health of the game I'm being shortsighted because all that really matters is how rich everyone will get from the HODL. But this is a mistake.

There is no long term value growth unless the short term players are happy and multiplying and eventually some of them start transitioning into investors themselves. The short term is what becomes the long term and right now the short term rewards is not supporting either and it shows.

Now there's a bit more to go over with SPS. Like the fact that it's not actually the best thing to hold if you want more SPS. Or the fact that you can sell the SPS and buy cards to help you transition from wage earner to investor.

But the belief that it goes down simply because they give it out daily is misguided but oft repeated lore.

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