Steem’s growing market cap creates a virtuous circle

Steem has been growing recently with its market cap growing from approximately $220m around a week ago to over $600m now.

While this benefits anyone holding steem it also benefits the entire steemit ecosystem in some interesting ways.

The number of steem within the steemit economy although growing is not expanding to fill the market cap. Instead the value of each individual steem is growing. Each steem holder that upvotes still confers the same fractional value during their upvote so this means that as the market cap grows the rewards to authors and curators increases a corresponding amount.

This means that equivalent content and curation efforts contributed to steemit today are rewarded around with 3x the rewards of 7 days ago. This can only make contribution more attractive and increase the pool of potential contributors and curators.

As those contributors and curators are pulled in some will earn steem by contributing more value to steemit.com making it a more viable and valuable resource for everyone reading articles or consuming content, which will also  reflect in its price over time.   

Some of them, seeing the potential of steemit, will also purchase steem helping to increase the price further (note this is a vector for incoming investors which is entirely separate from the pool of people that are simply looking to invest in cryptocurrencies).  Non-contributors on the sidelines observing these effects/multipliers that understand the virtuous circle that steemit’s increasing market cap creates will be more likely to buy in.

These effects are unique to steemit.

Other cryptocurrencies benefit from a larger market cap in that it confers additional credibility, visibility or the rate of increase creates FOMO (fear of missing out), thereby pulling more investors in to create exponential growth, however those susceptible to the parabolic chart are often also susceptible to the fear of losses. Just as users watching the exponential chart can snowball to push it up further these same skittish investors can snowball to produce big falls in the price or ‘bubble’ pops.

As users come to steemit however, there is much more to pull them in and hold them than the promise of an increasing price. The site itself may draw them in as a reader or they may become a contributor or curator, pushing up the fundamental value of steemit regardless of their holdings. For those that do hold steem any contribution or use of steemit likely makes them feel more invested (more so than merely holding a currency), conferring a better understanding of the long term value of steemit and likely making them less susceptible to selling through fear. 

Lastly the variable and often hard to predict in advance rewards conferred from authoring articles or curating will play off the psychology of the individual to create a “hard to extinguish” desire to contribute more to steemit in the hope of gaining more rewards, a hook something that can’t be matched by either existing cryptocurrencies or other content sites that don’t provide rewards.

Time will tell but steem has a lot stacked in its favour for both creating increasing value and also retaining it over time.