Taking a Realistic Look @ Steem Value & Growth
Hey Steem!
It's been a wild ride the last few days, so I wanted to compile some data for you so that everyone has a realistic understanding of Steem's value and where Steem is going.
As of July 13, 2016 there are:
98.937 million Steem, however of that amount there are
96.831 million Steem in the vesting fund (Steem Power that will take 2 years to power down and convert)
396,000 Steem Dollars
21,493 registered users
So in reality there is 2.106 million Steem that is available, potentially liquid, on the market (98.937-96.831), excluding the conversion of Steem Dollars and inflation. If everyone decided to power down their Steem Power at the same time, at most 931,000 (96.831 million/104) per week would be added to the liquid supply, excluding Steem Dollars and inflation.
The reason why the price of Steem has shot up so much, from $0.32 to $3+ is because there is such a limited amount of Steem on the market (2.106 million). With some media attention, people rushed into the market to get Steem. If all 98 million Steem were on the market, the price of Steem most likely would not have gone to $3/Steem. However, because there was only 2.106 million Steem available, the price shot up exponentially.
When you look at market data on various websites they state that there is an available supply of 80 - 90 million Steem @ $3.40 per Steem with a ~$280 million market cap.
The market cap is extremely misleading as it does not discount the 96.831 million Steem that can only be withdrawn over a 2 year period.
It is my estimate that the market cap of Steem is more likely in the $7-20 million dollar range, if that.
Let's look at it another way. At the current available liquid supply of 2.101 million Steem @ $3.40 each, the market cap of Steem is actually $7.143 million. Assuming that everyone powers down at the same time and all 931k Steem get put on the market in a week, then there will be 3.032 Million Steem in a week, or 5.825 million Steem in 4 weeks.
Even if the price holds at $3.5, the available Steem would be $20.3 million, and it would take 4 weeks to get there.
So what are other metrics to value Steem at?
If you compare it to Reddit, the valuation of Steem would be somewhere between $350,000 - $1.5 million.
Reddit has:
$4 billion dollar market cap
234 million users
The value each user produces is: $17.09 ($4 Billion / 234 Million)
Steem has 21,493 registered users.
If each one is as valuable as a Reddit user, then the total value of the Steem platform is $367,315.37. Even if you say that people have multiple accounts on Reddit and divide the number of user accounts by 4, and multiply the value each user creates by the number of Steem users there are, that gives you $1.469 million in valuation. Even if you say that a Steem user produces 10 times the value of a Reddit user, that still only gives you $14.69 million valuation. Nowhere near the $280 million that market data websites are giving you.
In conclusion, I think that the market valuation data websites are giving us are bogus and should be re-examined. Journalists should not be saying that Steem's market cap is $280 million, when the current available supply is less than 3 million Steem @ $3.40 per Steem. The exchanges need to discount the locked up Steem.
In addition to that, the price of Steem is currently very overvalued when you look at how many users are actually using Steem. Unless you are a speculator and are expecting big things to come from Steem in 1-5 years.
I simplified this and didn't really go much into inflation, Steem Dollars, speculation, future innovations built into the Steem price, and other variables. However I do not think that this takes away from the message.
What do you think market websites should set the available supply of Steem to be? What is a good way of evaluating the real value of Steem?
The real value of Steem is precisely what people will pay for it.
I don't take market cap into consideration when I decide to buy a cryptocurrency, and I don't think I've ever heard someone say 'I wouldn't buy that. It's market cap is too low.' Just seems like an arbitrary number to be used as an indicator... or in this case a ranking system over at CoinMarketCap.
YOUR assessment is that it is overvalued, however the market seems to disagree. Did you consider that the maybe the vesting function actually adds value to the ecosystem? I would argue that it changes the game, much in the way that mining reward subsidies did for BTC.
The available supply is accurate in my opinion, because it identifies what has already been purchased by other market participants. The best way of evaluating the real value of STEEM? Simple.. current market price.
Fair enough. I agree with most of what you said. The real value of Steem is what people will pay for it. However Market Cap does matter, especially when a journalist comes along and writes that the market cap of Steem is $150 - $280 million. That information just isn't correct.
The available supply is not accurately measured either. The current available supply of bitcoin is not 21 million. The current available supply of Steem should not be 98.937 million Steem.
There are 2 different concepts here: 1) what you (or any investor) think the Steem DAC (decentralized autonomous company) should be worth based on, for example, a comparison to reddit, and 2) what the actual calculated market cap is (i.e. token supply X token price).
So let's assume based on your comparison to reddit that the Steem DAC should be worth a total of $1M (middle of your given range). So obviously a $300M market cap is way overvalued if you think it should only be worth $1M.
But you also said that the market cap calculation is incorrect (i.e. that $300M is very overstated due to the supply being overstated). You say the true market cap should actually only be calculated to around $7-20M, so let's call it $10M.
So with a "properly" calculated market cap of only $10M, that means the Steam DAC is not nearly as overvalued at today's price as you are trying to claim. Especially when you consider that it looks like we're going viral, whereas reddit, your basis for comparison, is not.
Bottom line, today's price per STEEM token is certainly not wildly out of line, even by your metrics.
Very good analysis! On the other hand the market I think factors in the exponential growth of the usebase and the fact that the locked away STEEM has attention power and large compounding interest. But yeah the 300M market cap is not realistic as the supply is frozen.
This analysis is overlooking what STEEM really is. It is important to distinguish STEEM and STEEMIT. You cannot compare STEEM, a cryptocurrency with Reddit. But you can compare the platform of STEEMIT with Reddit. STEEM value is universal in social media. It can transfer to Facebook, YouTube or Reddit when adopted. STEEM can even go furthers as being used for payments in everyday life. My conclusion; you cannot compare STEEMIT with STEEM. One is platform, and other is currency
The currency (Steem) derives its value from what is created on Steemit. Although one is a platform and one is a currency, they are interlinked. It's like saying bitcoin (the currency) is different from bitcoin (the blockchain).
Well, not exactly. Don't forget that there is a price-stable currency (Steem Dollars) built into the platform. And an ecosystem (including a marketplace as well as applications beyond Steemit.com) will be built around Steem Dollars. So Reddit is really only good for a very, VERY rudimentary basis of comparison. All in all, when you a) consider the above reality, and b) do a real calculation of the market cap (factoring in only liquid STEEM), it starts to look like STEEM is undervalued, perhaps vastly so.
Hello tombstone. I'm glad you explained this, as I was about to post an article about it. Where can I find more detailed information about this? Can you give me a link?
why is it that only 8 of the 25 whales on http://steemwhales.com/ are holding Steem Dollars, and those that are holding are only holding a very small amount relative to their total estimated value on the platform?