Steem prices are hitting new highs, even rising above $6 just this morning. Rejoice! Wait, maybe you shouldn't?
I know it goes against the current grain, with all the people cheering and saluting over Steem's rise in price, but I'd like to take the time to explain to my fellow Steemians the relationship they have with each of the currency's values, and why Steem's rise is actually something that for most of us is actually quite bad.
Let's go over the way we get rewarded. For the sake of simplicity, we'll assume an Author Reward of $100.
In case you choose 100% SP (which you shouldn't), you'll receive $100 USD worth of Steem Power. When Steem is worth $2.5 USD, you'll get 50. When Steem is worth $5, you'll get half of that, 25.
In case you choose the 50/50 split between SBD and Steem, you will gain 50 Steem Backed Dollars, no matter what. As such, it is to your benefit when Steem Dollar is worth more. When Steem Dollar is worth $5 USD, that's $250 you can sell for other crypto. When Steem Dollars are worth $10 each, that's $500 you can gain in other crypto or transfer to fiat. Nice!
But what about Steem? I just showed you that while the value is identical in terms of USD, the amount differs. This is bad on multiple layers.
First, the manner in which we get said Steem is as "Steem Power," which impacts our voting strength. We're getting less of it. This means we will in turn get less of it down the line by way of curation rewards, and also that we might earn less SBD when we upvote our own posts. We likewise are able to lend less support to others through our upvotes. And remember, SBD is how we actually earn money here.
Finally, in terms of percentages, we'll be slower to catch up to "The Big Boys," so our relative voice in the community lags behind the higher Steem's value is, and thus the less Steem Power we gain.
Second, because we gain the reward in terms of Steem Power, which requires a 13-week period of "Powering Down" to actually cash out, the increased "worth" of all the Steem Power we've received prior to this crazy jump isn't readily accessible to us. And remember, this is the cryptocurrency market, can any of you guess what the value of a coin will be 13 weeks from now? Can you rely on it? I don't believe you do. In Crypto, it's monopoly money till you take it out. Steem Power is more monopoly money than most.
Third, and last, and related to the above, Steem is volatile. How volatile? Volatile enough that it can gain 100% in a single day. That means that while we gain less now, its value isn't something that we can rely on, and if it undergoes a correction, the end result is that we simply end up with less Steem Power, in absolute terms. With SBD and other cryptos, it's all about values. Up and down they go. Here, we actually use Steem Power, so ending up with less matters. And we can't cash out when it goes down.
So, what do we want? High SBD prices! What do we not want? High Steem prices!
High Steem prices may reduce the ability of new whales to buy in, which some people would consider good, and others consider bad. High Steem prices will attract more users, which again, has upsides and downsides (the biggest downside is that the reward pool is going to be split more ways).
But for me and you, the average Steemian? High Steem prices are no cause for joy. And I hope this little write-up will help clarify the situation.
Image from Pixabay.com