STEEM System Debt : Are we ready for another BULL RUN?
When doing analytical posts I try to use lots of diagrams and layman’s terms. I don’t always succeed in making things easy to understand so feel free to ask questions or challenge my conclusion and I’ll try to respond to all comments. As I began writing this post I was literally asking the question – "Are we ready for another BULL RUN?" I can see that the Crypto market is picking up again and we could be off to the races once more but I want to know if STEEM is a good place for me to be allocating my Crypto funds.
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I have long considered that the System Debt Level is a very important factor to consider with regards to the underlying economic model for STEEM and as I’ve written about it a number of times in the past it is a logical place for me to start. I explained the chart below almost a year ago with my post Impending STEEM DOLLAR Purge : The #1 Key Indicator To Watch so if you need a refresher please check that out. You’ll notice that the Green and Yellow lines were changed during Hard Fork 20 in September 2018 as the SBD Print Reduction Threshold was changed to 9% and the SBD Printing Halt was changed to 10%.
All of my charts for this post start early August 2018 as it was early in this month that we first had a complete SBD Printing Halt (crossing the orange line). Thankfully the SBD price finished coming back to earth at about the same time and I wrote The STEEM DOLLAR Purge Begins : This is what we need to DO. As you can see HF20 shifted the goalposts and we resumed SBD Printing for a little while, but it got pretty hairy for a while there when System Debt broke the SBD Haircut Threshold (red line) in November. You can see from the chart below that the SBD Price collapsed very quickly at this point and it wasn’t until February 2019 that the Debt Level and the SBD Peg at $1 US Dollar recovered.
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Since February 2019 the broader Crypto market (and STEEM) have been consolidating and recovering. The System Debt level has hovered around the 6% mark and the SBD Peg to $1 US Dollar has been relatively stable. These are both fairly encouraging developments but are they enough to start getting confident? Well, let’s look a little bit deeper at a few more charts. You can see from the above chart that the SBD has been fluctuating either side of $1 US Dollar for the last few months. Whenever it is below $1 US Dollar AND the System Debt level is (comfortably) below 10% there is an economic incentive for SBD holders to convert their SBD to STEEM in a process I’ve been calling a “Purge” of the oversupplied SBD to further reduce the System Debt.
The above chart shows the SBD conversions that have occurred over this period and you can see the big spike during November when I really cemented my reputation as a STEEM Doomsayer with my post STEEM Dollar Purge Update : The Bonfire has been lit! But more importantly you can see that there has been some pretty steady SBD Conversion going on through-out 2019 so far with maybe only a slight pause in late March – early April that corresponds with the SBD Price pushing above that critical $1 US Dollar mark. No surprises about this correlation.
The next thing I wanted to look at was how the total Circulating Supply of SBDs had changed over this STEEM Winter period as to me it represents Nett Debt for the STEEM economy. I was pretty encouraged to see that the total SBDs in Circulation had been Purged down from almost 16 million to just below 9 million at time of writing. It is a pretty clear trend downward and the ongoing SBD Purges have reduced the Nett Debt by almost half. Finally I wanted to try and pull all this data together in another old chart I first used when SBD was at $7 to predict STEEM DOLLAR Will Fall To $1 USD : Here’s Why
You can see the Blue line representing new SBDs Created which flat-lined at zero while we had SBD Printing Halts in Aug to Sept 2018 (pre-HF20) and again from Nov 2018 to Jan 2019 when the Debt Level spiked above the Haircut Threshold. While the Red line representing SBDs Destroyed spiked heavily at the peak of the SBD Purge in Nov 2018. However, as we come into April and May 2019 we can see volatility drop off and a bit of equilibrium return as the Green line representing Nett SBDs (Created minus Destroyed) gets closer to zero.
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In conclusion is does look like the worst might be over and STEEM once again has a bit of room to move in either direction without debt being a problem. Going forward I would think that if the SBD price can stay in that sweet spot near it’s intended peg value of $0.90 to $1.10 USD then we won’t get a new build up of fresh Debt. In that case the economic system should be fairly stable and the System Debt Level as a percentage will approximately track the actual STEEM price. That means that if we are indeed at the beginning of a new Crypto Bull market and the STEEM price can double in coming months then the System Debt Level will roughly halve from here and the risk of fresh SBD Haircuts on conversions (in the short and medium term) would be low. There are obviously a lot of other factors at play but I’d expect that this would be enough cause for optimism among the ranks of STEEM and SBD stakeholders.
DISCLAIMER – This information is for general information only and should not be taken as financial advice. I am not a financial adviser and I encourage all readers to seek independent financial advice before investing in STEEM or SBDs.
I definitely consider Steem being among the good places to be during the Bull Run. I like its core principle and seeing now how much development is taking place on top of it with all the new dApps and projects flowing in.
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Thank you for explaining all this in an easy way to understand 👍. And have have been think things are starting to come together for a likely rise in steem price.
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You're welcome. I'm glad it made sense. Hopefully it all comes back together for STEEM from here.
Hoping so mate👍
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Just saw this post @buggedout great info and perspective..... any chance you've heard of #spud and now #spud2 ? Any thoughts on this initiative and any chance you might help support it, it starts June 1st, 2019 and comes with prizes for smaller Steem accounts. Thanks and again, great job on this post!!!
Thanks. I wasn't aware of #spud until it was too late. Seems like a good idea so maybe next time.
I am sure there will be a #spud again, just not sure when.
This is quite the breath of fresh air :)
Always great to hear from you, mate.
Cheers. If I understand things right this is your 2nd STEEM Winter. Would be interested to hear your thoughts on whether you think this recent thaw is genuine.
Yes, I put $2000 in when STEEM was originally on the way down from $4.
Figured I'd found the bottom; but we kept sinking all the way down to a low of 7c
When we climbed back up to $1, I cashed in all my bitcoin and went all-in on STEEM.
Looks like a mistake now; but then I've been making a pretty consistent 2% yield each month and I've done really well out of Steemmonsters with those earnings, so I think I can forgive myself.
Solid analysis as always and appreciate the update on this data
Hmmm....
Well, all seems stable with STEEM being under $1.
Every time STEEM goes over $1 things seem to flip for SBD.
And, with STEEM being the inflationary currency that it is, we are only going up because the crypto market is doing 10x moves all the time.
The only variable is adoption.
If we get a lot of fresh blood, STEEM will go up.
If we get a lot of new investors, STEEM could go way up.
Else we get a bull run that will lag behind all the major coins.
My feeling is that there are things that haven't been fixed that will cause major problems when we actually get stress tests.
I would like STEEM to succeed, but i see lots of pitfalls.
Yes, STEEM still does have its fair share of problems and there is sadly no silver bullet to kill them all. But as long as we're making progress there is cause for cautious optimism :)
Your analysis is of huge value to those who are still invested in steem and hoping that things will change for better. Your analysis need to be on highest visibility on its own. This deserves to be within top 10 trending posts on its own.
I am going to promote it using actnearn network of promoters.
Thanks for the strong endorsement. I appreciate any help with promoting the post as I can get.
A bull run occurred already last 4 weeks in the main crypto currencies. My opinion is that new money goes to the main crypto currencies with high market cap and steem depends on niche players more and more. That said in this smaller class it might be one of the surviving small ones if we all promote it a bit better. I promote it on LinkedIn a little.
Totally agree. A rising tide lifts all boats - Including STEEM. The way I look at it the market swept BitConnect up to a billion dollar market cap in 2017 and it was utter trash - so it's not to much of a stretch to think STEEM would be along for the next ride too.
Always appreciate your posts on this topic. I guess we will see the usual SBD pump with the bull run and inflation hangover 12 months later ;-) What do you think of the alternative platforms such as whaleshars and were they are headed ?
Thanks. Yes, nothing fundamentally changed so we'll probably have another pump and hangover down the road.
As for alternative platforms I've had a bit of a peek around at times but I'm not seeing it. I am on Whaleshares but I think they missed a great opportunity to address some of the cultural issues afflicting STEEM. Unfortunately abuse just looks a bit different over there.
Yes I am on whale shares also; as I was hopefully it might be different. Time will tell but it does not seem less centralized to me.
You've not been wrong yet @buggedout. Thanks for the vote of confidence in steem, if buggs says YES then I feel do much better about it.
Cheers mate. Sometimes when I write positive stuff about STEEM I feel like this guy :-