Steem Hype - Where We Are Now/Why I'm Investing Now
Amara's Law is a computer saying which states:
We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.
What is going on with Steem right now? I'm seeing this question a lot and significant amount of fear and frustration. So let me lay out where I think we are and where we are going.
First, I created a graphic based on the Gartner Hype Cycle that explains with where we think we are. I have used the Gartner Hype Cycle because I believe the Steem blockchain is a technology and thinking of it that way instead of as an individual website helps to see where we are in development and where we could be going.
Let's Walk Through the Steps in the Cycle:
Innovation Trigger -> Steem Announcement in April of 2016
Steem blockchain announced as a proof-of-work blockchain, draws initial interest and presents the idea of mining cryptocurrencies through social interaction. Draws early adopters and investors but little media attention.
Peak Hype -> Initial Payouts/$1,000 Posts
Steem distributes 10% payout on July 4th 2016 and attention and activity on the Steemit platform spike. For the next several months there are a stream of $1,000 posts which continues the trend of author/investor adoption. As the hype starts to die down, activity on the platform slows as the STEEM token prices drops with decreased investment in the token. Hardfork 16 tries to balance the STEEM distribution by allowing early adopters to 'cash-out' over 13 weeks while decreasing the inflation rate to compensate for the faster power down rate. Lower STEEM price translates to reduced payouts per post and therefore drives down activity.
Trough of Disillusionment - Technical Development/Refinement
This is where I see us at today. The STEEM price is suppressed by the 'cash-out' of early adopters which is also driving out many other users as low post payouts and fear of platform failure drives them out. This stage is seen in many technologies, when the hype surrounding the development of the internet died, many wondered what it's practical use would be beyond distributing porn and business networks (followed by the explosion of e-commerce and communication). Facebook's stock fell sharply after it's IPO because investors excited by its incredible user base couldn't see how it could be monetized (now it's 2016 Net Income was $10.2 billion).
I think Hardfork 16 was necessary to create a more equal distribution of STEEM, allowing early adopters out decreases their influence and while a suppressed STEEM price was not the goal it is allowing small investors to come in a value levels. The 2017 Roadmap seems to be right on target to develop Steemit and the Steem blockchain over the long term (I'm particularly excited about overall simplification and communities). I believe that the developers need to be spending this time plugging away at the roadmap, because that is what will make the difference in long term success. I think @timcliff is doing a great job keeping us up to date on the developments he is seeing. I understand the cry for more information from the development team but what gets us to the slope of Enlightenment is the Official Release of Steemit so that is where the focus should be.
Slope of Enlightenment - Steemit Official Release/Launch of Partner Apps
The Slope of Enlightenment is where things really start to take off for technologies. This is where you start capturing a meaningful market share of your target market because most users shy away from anything marked 'alpha' or 'beta'. Partner apps like Busy.org and marketplace platforms that allow for social media based sales will widen the target market of Steem while providing users a diverse set of entry points to the ecosystem. This is where the refinement process works out the last details and everything starts becoming coherent and usable to an 'average' user.
Plateau of Productivity - Building User Base through Marketing/Partner Apps
This is where all the prior work starts to pay off. With a stable and refined platform in place, the time is right to roll out marketing campaigns to start mass adoption. Partner apps should be developed enough at this point to engage in their own marketing efforts to draw in additional users in other markets.
Why I'm Investing Now
If Steem with the help of @Busy.org can capture just 1% of the Social Media and Blogging market we could be looking at 1.5 million monthly active users verse our 12,000 currently seen. Based on that and the previous highs of over $4/STEEM tells me there is plenty of room to run up. While we may never see the STEEM price levels seen during the Peak Hype period, I could easily see us at $1 STEEM again and I'll gladly take a 10x return. Now, back to educating on STEEM price trends and preparing to help develop and market Steem to achieve mass adoption!
Nice post.
I wonder though... bitshares is trading at a third of a penny. Many didn't think steem could go below 10 cents. How can we know where the bottom is?
bitshares have 10 times more coins in circulation. Also steem and bitshares do not target the same market at all.
I agree the price of steem could go lower but both are not comparable.
I wonder though, are they comparable in terms of people not fully understanding them? Dan (IMO) has created two incredible systems, but they may be so technically complicated that others aren't willing to fully accept them so they instead invest elsewhere. Maybe it's an issue with the delegated proof of stake approach. I do think there are some similarities, though, as you said, they are targeting different audiences. That said, many of the witnesses are currently the same.
I try and look for the bottom every day in my daily report. I'm finding the initial indications of it but I can't declare it yet.
I don't know enough about Bitshares to speak intelligently about it.
The old catching a falling knife routine. Not an easy thing to do. :)
Simple answer is: we can't. Guessing the bottom is pretty much impossible, so the only sensible thing to do is keep making small purchases every time the price dips, cost averaging your way into large Steem holdings over time. With this approach, as long as you are consistent and keep it up, then at least your average buy-in price will be somewhat close to the bottom when we finally hit it.
Sounds like a good plan to me. Hard to do this on a currency that's decreasing in value instead of doing it on a currency that is increasing in value though.
Yes, from a psychological point of view it's harder than buying something which is going up in value. And there's no guarantee the price will eventually turn around. But the old saying "buy low, sell high" comes to mind. Too many people seem to be doing it the other way around... and with high risk comes high reward.
I find it helps if I buy with money I don't care about losing. If I bought, say, $5000 worth at once, then I'd be pretty pissed off to see Steem subsequently drop by 50%. But if I just chuck in a couple hundred bucks every now and then, it doesn't feel like a big deal and I can just forget about that money for the time being.
It could also be a case of throwing good money after bad though.
Which is another good reason to never go all in and keep your buys small. My Steem Power holdings are roughly 7% of my entire investment portfolio. If the whole thing goes bust, losing that money won't affect me much in the long run. It's all about risk management.
Replying here due to 'nesting' restriction...
Agreed. I have committed myself (and plenty precious time) to Steemit and Steem for two years so I am basically 'all in'... but I have only spent a small bit of BTC on purchasing Steem. Here is hoping it takes off ....
Imagine steem at 0.1 cents. We, the community shall manage who get a slice of the pie, like literally!
I can only agree with you, Steemit.com is still in its infancy and has monumental room for growth, the initial hype is in itself but an indication of the potential ahead as, obviously, the demand is there.
Great article, thanks for sharing your thought on the matter, namaste :)
Great piece. Upvoted and shared on twitter. Thanks for sharing. Stephen
Great analysis @leongkhan. We just need to focus down and get work done. A lower price is a great opportunity for those who did not get a chance to get into the hype. For me it's a buy. Huge project are being build and Steem is not get quick rich project. Now let's go to work and start organizing meetup for non tech. What I'm constantly doing everyweek here.
Seems that we just need to spread the word as far and wide as possible and keep going.
Well done! And you know, our @steepshot app will help this hype come true! =)
Looks about right. We just need to reach a critical mass to keep this thing going.
Some interesting thoughts on the price going down here.
I like your rational and pragmatic assessment.
Great post :)
Thanks, I'm voting for you as a witness. I hope we can move you up the ranking.
I appreciate it :)