Daring to play Devil’s Advocate

TLDR: The rise of tokens on steem-engine since (circa) June 2019 has coincided with a drop in STEEM market cap, and its relative value versus bitcoin. My thesis is that value has flowed out of STEEM and into these other tokens. It’s possible that the wider crypto investment market perhaps sees this as a problem for STEEM and values it less today than it was yesterday, and less tomorrow than it is today, causing a decline in price.

What do I know?

I humbly acknowledge that there is a lot about steem I don’t know and there are wise people on here that post about steem multiple times a day that know much more than me. My steem account was created in September 2017 but I didn’t actually become active until January this year, so I am still a newbie here. This is the first time I’ve stuck my neck out and gone against the grain but this has been eating away at me for some time. I am happy to be respectfully challenged if anyone disagrees with my ideas. If I have made any mistakes please let me know. Thanks.

Biases

Steemians love to post about steem, speculate about its price and imagine the possibility of a utopian future world when STEEM’s price is $10 or $100. Just to be clear, I love steem too - I think it’s the most exciting social network or community in crypto and turns the business model of facebook on its head - but what I don’t often see is people entertaining the thought of the steem ecosystem failing. Why? I think it comes down to cognitive bias - looking for what you want to find, and filtering out what you don’t want to hear when making decisions. I caught myself doing it today - I was watching a video on YouTube, and in this video there was one guy that had a very negative outlook for Tesla and he was explaining his ‘short’ thesis. I didn’t want to hear this and I ignored it. For what it’s worth, I also thought this guy was foolishly filtering out a lot of other information that didn’t suit his thesis. Conversely, someone like ARK invest (bullish on Tesla) looks at completely different sets of data in their research.

I would love steem to be around in five years with 10x more active users and the STEEM price 100x, but I am also realistic and open to the possibility that in five years this place is a ghost town and the price is close to zero.

altcoins and their ‘parents’

While thinking about this I thought about bitcoin and all the other alts, and the ‘BTC dominance’ metric. In the wider cryptocurrency space, BTC is at the top of the ‘family tree’. In this analogy, other alts like ETH and STEEM, which have their own token ecosystems then are the ‘parents’ of these tokens - so ETH is the parent of tokens like MKR, BAT, ZRX, REP, etc. STEEM is the parent of SCOTs like SPORTS, LEO, PAL, etc.

So I wondered whether it was possible to access information like a ‘ETH dominance’ or ‘STEEM dominance’ metric, ie. ‘What is STEEM’s value compared with the overall market value of STEEM and all the SCOT tokens and how has STEEM’s dominance moved since July 2019?’. I asked this question about the ethereum ecosystem on some subreddits but it seems the answer is no. I expect it’s also no for the steem ecosystem. The problem is that a lot of the tokens’ values are distorted thanks to folks doing shady things like buying and selling the tokens between separate wallets they both own to pump its price. There’d need to be a filter for volume to get around this - no doubt coinmarketcap has some algorithm they’re constantly optimising to address this problem and get the BTC dominance figures.

The beginning of SCOT tribes

When I first started reading about things like PAL, SPORTS and LEO on steem it was like a foreign language to me. It went in to the ‘too hard’ basket. However, a couple of months ago I visited the steem-engine website and logged in via steemconnect to see a bunch of tokens for my account to claim. Yay! Then it started to make a bit more sense. I experimented with staking and eventually sold some (currently ‘unstaking’ meme tokens - some of the power down periods are crazy long!!).

Looking for correlation

Steem’s price and market cap since June 2019

SCOT tokens ordered by market cap - I highlighted STEEMSPEAK and SPORTS because, let’s be honest, they’re the only tokens on this list that are not meme tokens

If STEEMSPEAK and SPORTS are fairly valued then clearly that’s a lot of value moving in to them from STEEM. Clearly STEEM’s price has suffered in the period since June 2019. There are other factors at play (great post from @taskmaster4450 about this), but I think this is something most people are ignoring. It’s very easy to add a ‘sports’, ‘life’ or ‘steemleo’ tag to the end of our posts and - voila - look at all the magical internet money you’re making! But just look at the value of STEEM. Are you any better off?

The positive in the STEEM price drop

STEEM payouts are valued in $USD terms (SBD?), and (depending on payout preference) converted to STEEM in some amount. So lower price means more STEEM in the conversion. If the price turns the corner, then that accumulation at low prices will be a big win when that time comes.

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