After an exponential rise from a market cap in the mid $20 million range to a high of over $400 million, Steem has crashed almost 50% to sit currently around $210 million. It appears to be sitting on or even breaking through an important resistance level around the $2/Steem price.
The question is, will it bounce off this level? Or is there more pain to come for Steem speculators and users alike? Nobody knows, but there are 2 critical forces at play that will determine this answer.
The inflation rate of steem is quite high, it will at minimum double every year in volume of units. This high inflation pays steem power and steem dollar holders in interest. You are essentially protected from inflation if you keep your value in steem power by receiving a high interest.
The other force at play here is the growth curve of the Steemit user base and content. If Steemit grows faster than it's inflation rate for the next few years to a decade, similar to Facebook or Twitter, then it's entirely plausible that the Steem unit will have a higher price in the future. Until the growth curve of the network levels off enough we could see further appreciation in price.
The current user base is about 45000. If we divide $210 million by 45000 we get $4667/user. This is a high valuation for a website, but we must also consider it's also a cryptocurrency with more users than just it's bloggers. This ratio should be something to keep an eye on to gauge whether Steem is overvalued/undervalued in the future.
You can keep tabs on the amount of Steemit users at https://steemd.com/distribution.
The volatility is sure to be spectacular as this goes forward, here's to hoping we can pick the tops and bottoms on Steem's inevitable rise.
