https://i.imgur.com/vUwinKa.jpg

I was just having a look at coinmarketcap for the hell of it and wanted to see the last time the markets were at this level, it was way back on September 15th, 2017. An *eternity* ago, or so it feels. I was actually interested in what the market cap was when I joined Steem on the 29th of January, 2017 - it was 17 billion. Yes, the total cryptosphere was worth 17 billion and less than a year later, it was at the all time high on January 8th with a cap of 820 billion. Pretty incredible growth at 45x and the regression so far is about 7.5x. Again, these numbers are all pretty meaningless.

![marketcap.PNG](https://gateway.ipfs.io/ipfs/QmU7WysnLQX1bKWchJERuFMgaEUmdfbVS663CHwfiQbqQu)

@taskmaster4450 wrote a post about why [Steem drops back further than other coins](https://steemit.com/busy/@taskmaster4450/why-steem-falls-more-than-other-tokens) mentioning two main reasons,

- Steemit Inc's selloff for funding
- The psychology of 'getting it for free' making it easier to dump

I agree with both of those but I actually think that it suffers a greater regression because of another reason that I have never heard of anyone mentioning other than me. 

- Steem Power

Yes, we know Steem Power makes dumping Steem during peaks harder because of the 13 week powerdown schedule and is likely a big part of the reason Steem lags in market movements, but there is another factor that I think plays a pretty big role in the price. I think Steem can get pumped *harder* than many other coins because only about 30% of it is liquid (20% on exchanges) with 70 percent vested and 15% of the total supply at least is the Steem ninja mine. 

## A little theorizing

What I think this means (I am unqualified but game to try) is that it takes less to drive it upward because large amounts of it aren't liquid to appear and sell to bring the prices down. On top of this, as price goes up, so do reward values, meaning that there is a game between selling on the market or, voting on the platform. This means more people are likely to hold or Power up to take advantage of their vote, thereby further restricting liquid supply. 

For example, The current feed price is 40 cents and at full VP my 30,000 SP would have a vote of 75 cents. However, the all time high price was $8.00 (20x up) and that would mean my vote would be $15.00 x 10 = $150 a day. That means that at full voting value at 50/50, my rewards could provide ~75 dollars a day *liquid* in SBD. On 150 dollars 50/ 50 with normal SBD at 1 and steem at 8, I could earn about 9.5 Steem from converting my SBD liquids to Steem or, I can get the same on the market by selling 9.5 Steem/ 75 SBD. One builds, the other depletes. A little game in the system. Steem is *harder* to earn the higher the price for various reasons, one being competition for the pool.

## SBD Bandits

This would bring in another factor of play as if like me when SBD was very high it was converted for Steem, this would add additional Steem into the supply. Of course, many just sold the SBD directly on the market for other coins and cash too. But, more Steem means dilution of Steem value doesn't it? And, because that Steem came cheap due to the 'unusual' SBD pump, it is more likely to be dumped later, going on @taskmaster4450's second point. 

So, while the liquids are narrow and pumping, there was (last December anyway) people converting large amounts of SBD to Steem. SBD pumped before Steem remember, so that means there was a great deal more cheap Steem to dump when prices eventually climbed. Some people were getting 11:1 Steem:SBD conversions, but 7:1 was common. Cheap Steem collected just before a major pump?

## Easy ups, long ways down

So what I think is that because of the various dynamics in play around Steem and in combination with SBD too, the restricted liquid supply means that prices are much easier to drive up as there is a smaller possible *immediate* percentage on the exchanges. It is quite important because if there was more liquids, there would likely be more sellers to temper the pump faster, making other sellers and buyers wary. But, buyers are able to drive the price hard upward with a small supply and feel somewhat safe they aren't going to get dumped on in very large volumes quickly because of the powerdown schedule. 

This means that prices are likely to reach higher highs than normally would be possible if all Steem was liquid. But then, as the market cools and starts to fall, there is a lot more Steem diluting the liquid pool than there would have been if SBD had held its peg. This will drop Steem down past where it would likely have been. I don't know how much more liquids were created but, a couple percent  of Supply when there is only 30% of total supply liquid makes quite a big difference to falling prices. 

*This is just my theory though.*

##  Distribution and new leaders

What is good is that now there is a chance for a greater degree of distribution which would help make the platform operate much more like it was designed. There has also been a great deal of SBD converted for Steem now which makes an unlikely SBD pump less effective than it was last year and if it pumps before Steem again, it isn't going to be created anyway. While the dynamics of Steem Power are still in play, at the next run SB is less likely to be used as dilution mechanism to inflate the Steem supply. This means that hopefully, the next run up won't have a regression *"quite as large"* as this last one. 

While this is just a theory, I still think that price has *zero* to do with project and Steem is going to see a massive improvement in position at the next runs. The more people are buying now on the markets to distribute is also going to play a role in the next regression as for many, it is their first time *buying* into the project, this means they are now investors and are therefore more likely to think about the way they use their investment and, how others affect it too. 

It is going to be interesting how the new dolphins and the like act when they have some real power to wield to help themselves and affect the payouts heavily of others. Their now hard earned and paid for stake is going to have real sentimental value, will they sell at 8? I would predict that there would be less selling from the newly bought in group and a lot more development behavior as prices climb, and holding as they fall. They become leaders. This should create a little more stability and over time, these waves will make Steem increasingly sustainable and predictable as the core users power and generate their own gravity.

What I like about Steem is there are so many things to consider, the thinking and learning availability is massive and even if my theory is incorrect, it is enjoyable to think in areas I am far from comfortable in. 

Taraz
[ a Steem original ]

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