Has the Steem bubble burst

Like most things that excite the financial markets, some people seem to have made a lot of money by riding the Steem wave.

However, after reaching dizzying heights, the value of Steem seems to be declining, or perhaps just beginning to find a realistic floor or true value.

In many ways, this lack of volatility is going to be a good thing for Steem holders - it is essential if Steem is going to become a stable, sustainable currency. 

Currencies need to have a relatively predictable value if they are going to be able to be relied on for everyday transactions and purchases.

When we look at the relatively short history of the crypto-currency that we refer to as Steem, much of the volatility that we have seen in the past has been stoked by specific events, rather than pure market-driven speculation. The troubles faced by Steem exchange is an example of an event that caused instability in the value of the currency.

One of the main things going for Steem (compared to some other commodities that have seen speculative activity playing havoc with its market value) is that Steem does actually have an intrinsic value. 

Steem operates effectively as a digital, virtual currency. Parties to a transaction can use Steem to transfer value between each other without the need for banks or other financial institutions.

One of the challenges

One of the challenges that we are seeing in being able to really understand what a true price or value is for Steem is the phenomenon of hoarding. It seems that of all the Steem that has been mined, a vast proportion of the currency is being held and not actively used in transactions. This hoarding is effectively stifling the growth of the Steem currency and making it difficult for it to become a sustainable digital currency. Unless there is sufficient volume of Steem being transacted, then there is no momentum or impetus for providers of goods and services to build the capability to accept Steem as a valid form of payment.

School of thought

There is a school of thought that suggests Steem holders may be opting to hoard their Steem currency as a way to manipulate the price of Steem, increasing value due to scarcity. However any attempt at market manipulation generally attracts the interest of governments and regulators, and is only likely to harmful to the success of the crypto-currency.

The danger

The danger is that unless we begin to see some momentum building in the consumer use of Steem, those retailers and service providers who are currently able to accept Steem will start to lose interest. Training staff and maintaining the systems necessary is only worth doing if you are receiving a material number and value of transactions in that currency – if the transactions aren’t there because Steem holders are hoarding (or for some other reason) then we will quickly begin to see retailers and service providers losing interest in this digital, virtual currency.