My baseless explanation of the recent STEEM pump

in LeoFinance11 months ago (edited)

You likely have noticed the sudden price pump on STEEM yesterday. At its peak, STEEM went above $0.40 and close to 8000 sats. It has now stabilized at about $0.30 and 5000 sats.

STEEM price courtesy of @coingecko
Source

Here is my little explanation for the pump. It is important to note that my explanation is a pure conspiracy theory and it has absolutely no basis. It is basically just for fun. 😜

My explanation of the pump has an assumption that Justin Sun bought his STEEM at about $0.20 per piece. If anyone has hard evidence to support or disprove my assumption, please share. I made this assumption simply because STEEM price was around that range prior to the announcement of the acquisition. Hence, there is no reason for Justin to buy STEEM at a higher price. He could have bought it at a lower price though, but I doubt it will be much lower.

The other assumption is that Justin Sun is a businessman who doesn't want to make a loss on this investments. He had admitted to this upfront, so this isn't really an assumption 🙂.

Then comes my explanation. Since Steem blockchain is going to be forked and HIVE coins will be airdropped, naturally STEEM price will be diluted post-fork. However, not all accounts will get HIVE coins according to the Hive announcement post,

The only accounts who will not be included in the initial airdrop are those containing the Steemit Inc ninja-mined stake, and those who actively contributed to (and publicly declared support for) the centralization of the Steem Blockchain.

Source

Unfortunately, @hiveio did not announce the list of accounts that will be excluded. However, even with just the ninja-mined stake excluded, the total circulating supply of HIVE will already be much lower than those of STEEM. Given the amount of support HIVE has gathered, it won't surprise me that half of the STEEM market cap will transfer over to HIVE. This will result in a 50% dilution of STEEM price.

While to most users the total value of your holdings should not deviate too much post-fork since you will get the HIVE coin as well. To Justin, he is looking at a 50% reduction in the value of his STEEM holdings. Hence, it will be in his interest to pump STEEM price and accumulate more STEEM on exchanges. This serves 2 purpose, first, by boosting STEEM price up, he can cushion the impact of the dilution. Say if STEEM price remains at $0.30 at the time of the fork, the dilution of 50% will just let it drop to $0.15. Next, he will also get some HIVE from the STEEM he accumulated so far since the tussle with the witnesses. All these should be able to reduce his potential losses substantially.


Quick TA

Since we are on this topic, allow me to do a simple TA. As you can see, the buying pressure is dissipating a little right now on the 4H chart. Hence, STEEM price against BTC is retracing. I think the price will drop to the 23.6% fib retracement level which happens to be in the range between the 21 SMA and 21 EMA.

STEEM/BTC chart on Binance

After which, it should push up again to a level which is around $0.30 in USD. If BTC remains stable at this $6k price range, that will be about 5000 sats.

In summary, STEEM pump because Justin Sun is accumulating and trying to protect his investment. Inevitably, this created some FOMO and probably led to further buying pressure from normal market participants. From a TA perspective, I see a trading opportunity.

Again these are just my speculation and not investment advice 😝. Of course the STEEM pump could be due to excitement over the Hive blockchain. In any case, always do your won due diligence and research for the investments you are going to make.


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I guess we will find out soon enough if some new whales show up and start doing things on either blockchain lol.

Thanks for the link!

Hi @culgin

Recent spike in price of steem has been incredible. Surely more than I expected. I wonder if we will experience huge crash right after airdrop.

My explanation of the pump has an assumption that Justin Sun bought his STEEM at about $0.20 per piece.

Exactly.

Friend of mine suggested, that it could be Justin purchasing a lot on some of his proxy accounts. Knowing that he will get large amount of new HIVE token. Knowing also that witnesses will be powering down and trading steem to HIVE. So he could sell his HIVE tokens, earning quite a decent amount of money. Knowing that demand for HIVE token will be very high in upcoming days.

You wrote lately:

As a common investor, I just want to protect my investments as much as possible.

I wonder if we will witness and large stakeholders will dump their STEEM right after airdrop on new HIVE chain will take place.

The truth is, that if old witnesses will power down right away and dump their steem - then they may damage part of Justin investment and make him lose out little bit. But it's most likely just a small % of his porfolio.
At the same time all of us, those who invested their live savings into steem will suffer the most. Our investment will be crushed, without much of a chance to do anything about it :(

In my opinion blocktrades and other large accounts, who will build their fortune on migrating community to new HIVE chain - they should wait a bit with dumping their steem tokens. To allow others to do it as well. Just my 2cents.

Given the amount of support HIVE has gathered, it won't surprise me that half of the STEEM market cap will transfer over to HIVE

I don't see it happening. Imagine all of sudden lack of demand for steem and so many people trying to sell. Would you sell your steem if price would go down already to 0.01$? Or would you hold on to remaining?

Yours, Piotr

That would be great... less 50% and ninjan-mine.

@tipu curate

Resteemed already :) Upvote on the way