The STEEM token is the externally accessible currency used for interacting with the Steemit social content portal. Steemit is a platform designed to give tangible power, and ownership, back to the community driven social content platform.
A simplified analogy is that Steemit is like Reddit. but content creators, posters, commenters and voters are given direct monetary rewards for any participatory activity within the ecosystem.
Given the characteristics of a blockchain, the promised delivery of a permissionless, secure, censorship resistant digital content ecosystem, seems viable. Steemit’s team and its crypto visionary Dan Larimer, have built a novel system of incentives that are designed to mitigate for extraneous circumstances surrounding liquidity, community participation and financial volatility.
Exchanges and trading Pairs
The most popular onramp for purchasing STEEM tokens is Bitcoin. BTC/STEEM handles close to 50% of the volume in the market and over $500,000 worth of daily trading volume. The 2nd most popular trading option is STEEM/KRW, making Korean Won the most popular fiat onramp for STEEM.
There are suggestions that some of this Korean Won volume may be speculative, because of the popularity of crypto trading in South Korea, however, Steemit as a platform has shown historical growth in terms of its Korean userbase, and has its own dedicated Korean Website. Thus, it’s feasible that a percentage of the KRW volume can be put down to Korean content consumers and distributors buying into STEEM’s content platform philosophy.
How active is the Korean community?
The most popular exchanges for trading the BTC/STEEM are Bittrex and Binance, which together account for over 75% of the pair’s trading volume. Interestingly, the exchange that handles the most daily STEEM volume is South Korean platform, Upbit, offering the KRW/STEEM pair. It handles over USD 8 Million of 24hr volume in the pair, around ~275,000 STEEM tokens.
The STEEM economy: The 3 token options
Operating within the STEEM ecosystem, can occur with any of three different tokens which each have their own separate utility, these are; STEEM, STEEM POWER and STEEM DOLLAR.
STEEM is like the equity share of the Steemit platform, designed to be traded on exchanges and be active on the crypto open market. With STEEM, users can trade Steemit stake for other digital assets/fiat pairs, or, power it up and receive STEEM POWER to interact with the Steemit ecosystem. The supply of STEEM doubles each year, 90% of this new supply goes to holders of STEEM POWER tokens, while 10% is allocated for users that create and curate content on Steemit.
If users are concerned about crypto volatility, Steemit also offers a STEEM DOLLARS (SBD) option, which is a ‘within the ecosystem’ currency that pegs a user’s Steemit stake one-for-one with the US dollar, with users also receiving a 10% yearly reward for holding. Users can choose to receive SBD for curating and creating content, or they can exchange it for STEEM.
STEEM POWER gives a user rights to vote on Steemit content and to receive dividends as the network expands. STEEM POWER is generated when; new STEEM is issued, STEEM tokens are ‘Powered Up’, and when content is created or curated. The greater a user’s accumulated STEEM POWER, the more power their votes have.
Steem Power can also be ‘Powered down’, and converted into STEEM tokens, so a user can onramp onto other assets and exit the STEEM ecosystem. However, accumulated STEEM POWER, can only fully be converted back into STEEM, gradually, in 104 equal parts across 24 months. The Power Down process can also be cancelled at any point in the 24 months. It is designed this way to create a committed ecosystem of content, where users have reasons to stick around and participate.
Recent analysis of the daily numbers of Powered Up vs Powered Down STEEM on the ecosystem, shows a preference of users to Power down their STEEM POWER. In the last week, on average per day, 216,183 STEEM was Powered Down, while 185,249 STEEM was powered up, an average difference of ~16%, 30,934 STEEM, or ~USD 39827.52.
While these fundamentals may be concerning, a potential explanation could be that some users are powering down just a portion of their STEEM POWER for liquidity to use for some other purpose, rather than because they no longer want to participate within the ecosystem. There are still clearly those who are willing to ‘Power up’ their STEEM and participate in the ecosystem, however, the amount of STEEM being ‘Powered Down’ may be of concern to stakeholders. Adding to this concern is an apparent negative trend with other network fundamentals.
For example, recent data shows that both the number of active users on Steemit, as well as the number of user comments and posts, have steadily decreased over the last six months.
A potential explanation may be that the drop off in users is connected with the recent downward price movements of STEEM, with users exiting the platform as they witness the value of their stakes diminishing, a possible negative correlation between Steemit usage, and STEEM price.
During April 2018 the price of STEEM rose substantially from ~$1.4 to ~4.02 , a rise of close to 400%. In the same month, however, the number of active users dropped. A counterintuitive result that seems to imply that even as STEEM becomes more valuable, users are choosing to ‘Power down’.
The graph shows the normalized USD price, and volume, of five different STEEM trading pairs over the last 90 days. STEEM/BTC, STEEM/KRW, STEEM/USDT, STEEM/ETH and STEEM/TRY. The orange line represents an Index of the prices, blue is STEEM/BTC, yellow is STEEM/KRW, green is STEEM/USDT, navy is STEEM/ETH and STEEM/TRY is turquoise. The bar charts below represent total trading volume in USD.
Macro market conditions could also be impacting usership. Given the continuing bear market, there are likely fewer curious onlookers in the digital asset space, and thus less user activity on a crypto content platform like Steemit.
Google Analytics: ‘Bitcoin’ search interest USA, South Korea, Japan. Interest in Crypto falling away?
The above chart shows the top 20 Steemit categories that users posted about on 30/07/2018, and indeed posts surrounding ‘Photography’, ‘Life’, ‘dmania’ (Steemit’s meme category), far exceed posts on subjects like ‘cryptocurrency’ or ‘bitcoin’.
But, the historical list of Steemit all time top 20 categories, indicate that ‘Photography’ and ‘Life’ have always been the platforms most popular categories. It seems unlikely that users interacting in these categories have been starved of content because of the crypto bear markets meaning it should not be a factor in them shifting away from Steemit.
However, compared with the historical rankings, there has been an apparent fall away in digital asset related content, which may explain the dropping user activity on the platform.
‘Bitcoin’ and ‘cryptocurrency’ are the 3rd and 5th most popular posting category in the historical data, while ‘cryptocurrency’ and ‘bitcoin’ are 6th and 7th most popular categories based on daily data from the 30th of July.
As well as looking at overall historical data, it may also be worth comparing what Steemit content looked like during booming crypto markets, which coincidentally were the times when Steemit was most used, to assess how a bull market affects the nature of user activity
Steemit user growth across 2017-Q1 2018
Top 20 Steemit categories 01/30/2018
The chart above shows the most popular posting categories on January 30th, during the height of Steemit’s popularity. Compared to the July posts discussed earlier, there are over three times as many posts related to ‘photography’, and twice as many to ‘life’.
The fact there has been such a steep drop off in Steemit user postings and activity, even across evergreen topics unrelated to the wider crypto market, is concerning. It may indicate that even if the price of STEEM and other digital assets does improve, original users of the platform may have already migrated away from it.
Regression Channel and Long Term Trends
On the 1D chart, the bullish EMA cross (not shown), or Golden Cross, has not occurred which confirms STEEM’s negative linear price trend, with a Pearson’s R Correlation between time and price of 0.81 in 2018 (not shown) and 0.86 since early May (regression channel). Price is currently retreating from the upper 2 standard deviation region and heading back towards its mean.
The volume flow indicator (VFI) has been above 0 since mid-July and has diverged from overall price movements at time, which may be bull signal if continued. The VFI interpretation is a value above 0 is bullish and below 0 is bearish, with divergences between price and oscillator being high probability signals.
Additionally, price volatility for STEEM has slowly compressed, visualized by bollinger bands. Volatility compression typically precedes a price breakout, which may lean bullish given the VFI divergence.
If not, then a continuation of the downtrend within the regression channel is likely with a retest of $0.90 to $0.79 (dashed lines), which are both key support levels and price mean values within the regression price channel.
Ichimoku Clouds with Relative Strength Indicator (RSI)
The Ichimoku Cloud uses four metrics to determine if a trend exists; the current price in relation to the Cloud, the color of the Cloud (red for bearish, green for bullish), the Tenkan (T) and Kijun (K) cross, Lagging Span (Chikou), and Senkou Span (A & B).
The status of the current Cloud metrics on the 1D frame with singled settings (10/30/60/30) for quicker signals is bearish; price is below the Cloud, Cloud is bearish, the TK cross is bearish, and the Lagging Span is beneath the Cloud and price.
A traditional long entry would occur with a price break above the Cloud, known as a Kumo breakout, with price holding above the Cloud. From there, the trader would use either the Tenkan, Kijun, or Senkou A as their trailing stop.
STEEM is sitting at ~$1.15 after attempting a failed Kumo breakout. However, the RSI is currently at 37, approaching oversold territory, and currently experiencing an uptick. The RSI metrics may indicate that STEEM will have enough buying pressure to re-attempt a Kumo breakout in the future. The near support levels are $1, $0.95, and $0.75 (critical to hold), while longer term support is $0.30. Price targets for a successful Kumo breakout are $1.52 and $1.94.
The status of the current Cloud metrics on the daily time frame with doubled settings (20/60/120/30) for more accurate signals is bearish; price is below the Cloud, Cloud is bearish, TK cross is bearish, and the Lagging Span is beneath the Cloud and price.
Again, the RSI is currently experiencing an uptick from near, oversold territory, which may provide some price support for a new Kumo breakout attempt. If so, price will need to break and hold above $2.50 (flat Senkou B) for a successful Kumo breakout with resulting price targets of $2.98 and $4.16 (both flat Senkou B and previous failed resistance levels).
Steemit’s ecosystem has novelty as a blockchain built content platform that has found a potentially viable solution for delivering monetary rewards to its user community.
However, its declining usage is concerning — especially if this issue is associated with deeper problems related to the platform itself such as user experience, rather than macro economic factors in the crypto sector. Investors may wish to monitor usage as the general crypto market recovers, for a corresponding increase in Steemit community activity.
Technicals for STEEM are leaning bearish despite the recent uptick in RSI and VFI divergence. Both, the prudent short term trader (10/30/60/30) and longer term trader (20/60/120/30) will await a positive TK cross and Kumo breakout above ~$1.52 and $2.50, respectively, before entering a long position. Both trader’s support levels are $1, $0.95, and $0.75, while the bearish scenario support level is $0.30. The (10/30/60/30) trader’s price targets are $1.52 and $1.94, while the (20/60/120/30) price targets are $2.98 and $4.16.
Disclaimer: This analysis has been designed for informational and educational purposes only. Readers are advised to conduct their own independent research into individual assets before making a purchase decision.
About the authors
Christopher Brookins is the founder and CEO of Pugilist Ventures, a quantitative investment firm focused on digital assets and blockchain technology. Chris has a deep knowledge and unique perspective on digital assets formed by his polymath experience in equity trading, credit investing, and business development at two West Coast startups (one acquired). He has been involved in the blockchain community since 2014. Follow @chris__brookins
Aditya Das is Brave New Coin’s in-house market analyst. Raised in Dubai, UAE, he holds a post-graduate honors degree in Economics from the University of Auckland and a BA in Economics from the University of Sussex. Prior to joining BNC his most recent roles were as a researcher and Economics tutor at the University of Auckland. Follow @Quartlifecrypto