A guide to investing STEEM - points to consider

I never really want to blog about the price of STEEM or other investment related matters. Yes, I have criticized the broken economics for many years, and continue to do so, but I tend to avoid talk about price itself. I have in the past talked about stock prices, especially AMD on Steem in the past, but crypto is too wild and irrational. There's too much tribalism and people get upset or offended at the drop of a hat. However, I see too many newbies throw their money at STEEM, and sometimes I feel the urge to offer some perspective so readers can make a more informed decision. I have always hesitated in doing so, but years later, I'll give it a shot. I'll try to steer away from controversial matters and avoid pointed declarations wherever possible; instead guiding you to the right things to research and consider. One important thing to mention - this post does not just look at STEEM in a vacuum, but as part of the crypto market; and as such, STEEM will be competing with other tokens for your investment.

Please note that this is not financial advice and I'm not an expert - merely sharing some facts and my experience following STEEM as an investment over the last nearly 4 years.
First, some context and history.

For personal context, I have been following the crypto space ever since Bitcoin miners were buying up the graphics card I wanted to buy - AMD Radeon HD 7970 - in 2012. I had to go with GeForce GTX 680 instead as the 7970 was constantly out of stock. At the time BTC was $5, but I had no way to buy it where I live. Anyway, the upshot is I was familiar with the crypto market and was no stranger to crazy volatility by the time Steem arrived. Unfortunately, none of that prepared me for the wild ride Steem has been. I won't bother with the usual basics like "buy low, sell high", don't FOMO or make any impulsive/emotional decisions, HODL if you're unsure, study the token you're investing in detail, study the price history, don't gamble what you can't afford to lose etc. etc. I knew all of that and I'll assume most of my readers do too. But it's the finer details that often go ignored, that I learned the hard way, that I'll talk about here.

Before you invest in any token, it's important you understand the history. Steem was ninja mined into existence in late March 2016 amidst a fair bit of controversy. I'm not going to offer my opinion on contentious matters, but please do your own research on Steem's ninja-mine launch as it plays in the minds of potential investors to this very day. The fledgling coin quickly saw some adoption and hovered around the top 20 mark through Q2 2016. It steadily climbed up the ranks till it hit a meteoric pump (and later dump) to $4 in July 2016, rising up to #3, ahead of XRP, behind ETH and BTC. Unfortunately, STEEM was hyperinflating at over 200%. As a result, it plummeted 97.5% to $0.10 in just 4 short months, the most spectacular decline I've ever seen for a major top 5 crypto asset. Eventually, Ned managed to convince Dan that the hyperinflation was totally insane, and the inflation was reduced to 9.5% in December 2016. Steem's economics have remained largely the same since, apart from some minor tweaks.

Since then, the STEEM token has been one of crypto market's greatest failures, falling from a stable top 20 position down to the 80s. Not because there are tokens that have performed worse, many have, but because no other network with this level of usage and development has capitulated this heavily. Here's why.

Inflation is key

This is obviously the most important factor. The December 2016 reforms were a major improvement over hyperinflation, but it's still too high, and remains too high. Taking up a 10% SBD debt makes matters worse. This should have any investor's alarm bells ringing, so please understand the risks involved. Study the inflation characteristics of STEEM, how new tokens are allocated, how they are dumped, etc. Hint: dishing out tokens for disproportionately low value creation is unsustainable.

User activity != token value. Economic activity == token value.

No need to obsess over dapp tracking websites, transaction counts etc. No one cares, and none of this "fundamentally" indicates token value. It's all about how capital flows through an economy. Instead, look at fundamental economic activity of STEEM. Hint: Precious little of it on STEEM.

On a related note, if STEEM hits $X, don't start celebrating and declare it now somehow a Reddit competitor. No, that will only happen when it has dozens of millions of daily active users, irrespective of price.

Token value rests on speculation and future development, not as much current product

Steem objectively has greater usage than most tokens above it, but it has proven to be a flawed product. Investors are more likely to invest in a future product that has not yet failed, against a current one that has. Note however, that the market may respond strongly if Steem's future upgrades and roadmap are worthwhile.

Never power up

Don't do it. Earning 10% curation rewards on a 10,000% voltatile asset is pointless. The 3 month window is far too long for a very volatile crypto market. You will lose out 80% profit potential when/if the time comes for STEEM to pump, waiting for tokens to power down. I get it, you're a HODLer and a believer. You find giving out money powerful. However, there are much more efficient ways to massage your ego. If you are truly religious, you'd want to accumulate more STEEM, you'd want to sell high and buy more lower.

STEEM is, after all, an altcoin

This may at first seem like a negative, but this is how you can justify investing in STEEM. Having completed nearly 4 years on the market, STEEM can with a high degree of probability be classified a degenerator. It is a long, long way away from establishing characteristics of an oscillator altcoin, and it is highly likely that it never will. You can read more about about degenerators and oscillators here.

How do degenerators work? They can gain a substantial amount in short periods of time, but over time keep losing value in BTC/sats. STEEM is a particularly potent degenerator, burdened by high inflation and moreover "dumb" inflation, so to speak. The flipside is that there is also a lot of "dumb" money (no offense, it's just jargon) emotionally invested in, powered up and doggedly HODLing STEEM. Both combine to make STEEM a strong degenerator.

The end result is that, while STEEM will lose satoshi value for most of its existence, there'll be short durations where it can increase its satoshi value exponentially. This is where STEEM is worthwhile, if risky, investment. Get in when STEEM is bottoming out versus satoshis, exit when the pump happens. Feel free to buy back in later when the price is low again.

Now, I'm sure someone will point out that history does not dictate the future, and STEEM will break out of this cycle and maintain a stable value of 0.001 satoshis at some point, and onwards to $100. Sure - Betelgeuse may explode tomorrow. But an investor cannot function on hopium, they must make decisions based on the facts available, based on reality.

Support Steem with activity, investments not required

I get it. You love Steem. I want it to succeed too. But you don't have to invest your hard earned money into it. You can support Steem by creating content, curation, getting involved in some project, offering your thoughts to improve the project, contributing code on GitHub etc. etc.

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I edited out a couple of more controversial points, but I think this would be a good place to get started. To reiterate, do your own research, make your own decisions. The above may come across as negative, but I'm just trying to help you and make sure you make a well-reasoned investment.