So, "What's Going on Again" in Crypto?! Here's a Simple Answer

I’m following @rival and I noticed a post he made 3 days ago… “WHAT’S GOING ON AGAIN? Can someone tell me the logic about crypto? I don't think I am born for it.”

So, I commented. After reading my comment, @rival got back to me and suggested I post my comment for everyone to see. So, I've posted it following the video.

PLEASE NOTE: I’ve taken the liberty of editing the comment for posting to the Steemit ecosystem at large. Also, I'm not a specialist in these matters. The points made following represent my opinion only. For investment advice, please contact a n investment professional.

“You're not alone. It can be confusing. But understand, for the most part, cryptocurrencies are considered unconventional or a new convention and is therefore, except for the most ardent followers, new ground being tread on by all.

Cryptocurrencies are not like fiat currencies. For example, unlike cryptocurrencies, fiat currencies are mandated into existence and are highly centralized being managed by government – e.g. the ECC and the Euro. When it was first released as a new currency – the Euro was mandated into use by the EEC and adopted as the sole currency for all, except the United Kingdom. Therefore, from the get-go, it became widely held with an accepted value since it was infused with the confidence and backing of a multitude of nations!

On the other hand, Bitcoin never benefited from such a vote of confidence on its launch. Bitcoin is decentralized (no ‘obvious’ government backing) and it knows no geographic boundaries, to mention just a couple of its many uncommon currency characteristics. Therefore, it has struggled over the last 9 years to gain stability enough to warrant wide-spread public trust in both worlds, crypto and fiat. However, Bitcoin now seems to have gained acceptance in the Crypto world, for the most part, and appears to be on the verge of a breakout into the fiat world! As a result, in my opinion, I believe the best for Bitcoin is yet to come. Although short term trading – buying and selling - in Bitcoin is common, for those of us who are small players, it seems the best play may be to hold it until your investment goal value is met then sell. Some say the sky is the limit. Nonetheless, it’s always wise to be cautious.

Now STEEM, the cryptocurrency is different. It may gain wider acceptance more quickly since, as a cryptocurrency, it should be able to ride somewhat on the coattails of Bitcoin's success. However, there may be a little, short-term fly in the ointment for STEEM - Steemit. I would characterize Steemit as the flagship on the Steem blockchain. I believe the future of both Steem the blockchain and Steemit the social networking platform holds promise. The wonderfully UNIQUE feature of Steemit is its reward pool and the ability for Steemians to earn an income in Steem Dollars (convertible into STEEM or Steem Power then eventually Bitcoin and cash if so desired) by posting, up-voting original content and curating content. And further, when it’s realized by the masses outside the crypto world that the Steem Dollar rewards are generated, not from the cash in our pockets, but by our active participation on and the design of the platform itself, it evokes a tantalizing, almost universal appeal. Therefore, it’s little wonder Steemit was first widely promoted by the STEEM community touting this unique feature... and it worked.

Unfortunately, it’s often, damned if you do, damned if you don’t! A concept may be wonderful, but nonetheless, in practice, surprises are bound to appear. For example, regularly cashing out your Steem Dollar rewards for the income and not holding some STEEM for the capital gain can temporarily impede growth in the value of STEEM since it’s not helping to reduce the STEEM supply while at the same time draining cash. After all, one should expect those benefiting from Steemit – the early adopters - to be first to invest in STEEM to support the platform through it’s early growth and to share in a hopeful future capital gain – something it seems may not be happening to the degree it could. (Steem Power comes into play here as well. But it’s more about up-voting and curation clout, so I’ll leave that for another time.).

However, to be fair, there are many other factors at play here as well. For example, in hindsight, the early inflation rate – the degree to which new tokens were created – may have been overly optimistic. So, on December 6th, 2016 the inflation rate of Steem was changed to a more modest 9.5% per year, reducing by 0.5% per year thereafter.

In addition, the role played by the Whales - of which Steemit.com is the largest - can bear heavily on the value of STEEM. If the Whales embrace a responsible, relatively uniform and positive long-term outlook for the platform where modest profit taking and personal protocols to promote the health of the platform are exercised, success may be within reach.

Then there’s the naysayers! And there are many - a Ponzi scheme complaint comes to mind. I won’t go into these arguments here but suffice to say there may be some merit in what they say. However, if we address the foundation on which these claims are made, analyze real results to date and move for consensus on those adjustments necessary, we have a good chance for success.

So, don’t get discouraged. STEEM the cryptocurrency, Steem the platform and Steemit the social networking platform are in their infancy. The sudden boost in value and the fall back earlier this year was, in my opinion, a result of unusual forces at play hopefully not to be repeated. We are probably right where we should be and the good news… Steem is still affordable.

So, where do we go from here?

Be patient, stand back and take stock of your position. It may be that the bigger play in Steemit ‘at this time’ is a potential capital gain on STEEM, a reward afforded us by our early adoption. But you need to own STEEM to benefit. Therefore, building a nest-egg is always a good plan whether it’s cash, stocks, bonds, mutual funds or STEEM. And you’re able to adjust your strategy by weighting the alternatives according to your personal circumstance – income or capital gains.

Further, STEEM also needs new capital - new investor/buyers. The currency simply needs to be more widely held with a demonstrable growth potential. Strategies such as SMTs and SMT Oracles and Oracle QA, community building, effortless on-boarding and mobile will go a long way to help create greater interest and participation.

Nonetheless, as early adopters of Steemit and Steem we have a wonderfully unique opportunity to earn income AND ‘to buy and hold’ STEEM all made available to us through participation in the platform - unlike the fiat world where you need to pony-up with after tax dollars from your own pocket. Then, when that tipping point is reached - the sweet spot where Steem demand outstretches both the current supply and inflation (new STEEM added to the pot) - the STEEM price should start it’s climb, one where an income play, although a huge benefit, may pale by comparison to the capital gain to be had.

In my opinion, with effort by all of us, it can happen. It's just a matter of time. So HANG IN THERE!

FYI - The following at @ned along with the SMT White Paper may go a long way to paving the path for new Steem investors. It’s very exciting.”

https://steemit.com/smt-oracles/@ned/the-smt-oracles-whitepaper-call-for-academics-modelers-and-deep-thinkers