Why now is the best moment to accumulate Hive

in LeoFinance3 years ago

Best moment to hive.png

There are lots of discussions about inflation on the blockchain. Some think that the inflation is too high and in their eyes that's the reason why the price of hive didn't follow when most of other currencies saw their prices rise. There are voices out there that want to reduce the inflation and I tried to think this through. Are they right with their claim? I believe not.

As a nice side effect of this research, I came to the conclusion that now is the best moment to accumulate Hive...

What is inflation?

A lot of people are talking about inflation but there are actually two types of inflation.

The „real“ inflation

There is the inflation that you see in Venezuela for example where prices for goods are increasing daily. In this country the inflation is so high, that we need to call it hyperinflation. This type of inflation can be summed up as an increase in price levels and a decrease in purchasing power. The value of the currency decreases.
To calculate what I call the real inflation, economists normally take a basket of goods and compare their price over a period of time. If the prices go up, the inflation goes up.

The monetary inflation

However this is not what people are talking about here on the blockchain. What they mean with inflation is actually the money supply or monetary inflation. It's important to know that both things are not equal but rather related to each other.

The monetary inflation, the money supply has a big impact on the real inflation. There are however also other factors influencing the real inflation. There is the speed with which a currency is exchanged. A faster speed brings higher real inflation. Finally there is also the quantity of goods in circulation that enters the picture. In a way it's a balance between supply and demand. If the supply increases too much in regard to the demand for the currency, then the price of the currency tends to go down and we get a loss of buying power. So the monetary inflation or the supply of a currency is only one parameter among several to influence the value of a currency.

It's not that easy to understand how everything works and even economists don't always agree on the mechanisms. I'm no economist and I don't claim to understand everything about it. However what I can deduct from all this is that reducing the money supply will not automatically bring a higher currency price!

The Dcity experiment

During the last weeks, I followed quite closely what was happening on dcity. First the price for the sim token decreased. As a response the Dcity government decided to increase the taxes drastically. By doing that, they were limiting the token supply. The taxes went up from around 10% to somewhere close to 80%. In spite of the drastic limitation of the supply, the token went on loosing value. Why?

Most of the users on dcity invest in the game because they want to have a return on their investment. By increasing the taxes, this return was strongly reduced. With these high taxes, dcity didn't provide a better return than other projects out there. People stopped buying cards and stopped building their citys, at least to a certain degree. This means that the reduction of the supply actually reduced also the demand and the token price lost more value.

What would happen if the supply was reduced on Hive?

I believe the outcome would be very similar to what happened on dcity. The reduced supply would also reduce the return on staking, voting, commenting and creating posts. This would reduce in return the demand for staking and in general the demand for hive. As a result, there would be no major influence on the price of hive but it could lead to a lot of people abandonning the platform!

If you reduce the supply of a coin and at the same time you reduce the demand for the coin, then there will be no positive effect on the price!

Let's look at the supply of Hive

People are always wondering why the inflation (= monetary supply) is so high on hive. Well actually it's not high at all. It doesn't mean that if you can get 15% APR on curation the the supply is growing by 15%. First of all we shouldn't forget that with our votes we allocate the supply of hive to the posts. However not everybody is voting. There are all the tokens that are not staked. Then there are a lot of votes that don't count (dust). I believe that maybe only 50% of all the hive supply is actually using it's voting potential. That means that the people voting get a bigger part of the pie than the people who don't. Which I find quite normal.

If you can get a return of 15% APR with curation, this doesn't mean that the Hive supply grows by 15%

So how much is the Hive supply growing?

I tried to research that a bit and I've found a very interesting article by @dalz where he shows the supply of Hive as it was planned in 2017 on the old blockchain.

YearSupplySupply IncreaseNew Supply
2016250,000,0009.50%23,750,000
2017273,750,0009.00%24,637,500
2018298,387,5008.50%25,362,938
2019323,750,4388.00%25,900,035
2020349,650,4737.50%26,223,785
2021375,874,2587.00%26,311,198
2022402,185,4566.50%26,142,055
2023428,327,5116.00%25,699,651
2024454,027,1615.50%24,971,494
2025478,998,6555.00%23,949,933
2026502,948,5884.50%22,632,686
2027525,581,2744.00%21,023,251
2028546,604,5253.50%19,131,158
2029565,735,6843.00%16,972,071
2030582,707,7542.50%14,567,694
2031597,275,4482.00%11,945,509
2032609,220,9571.50%9,138,314
2033618,359,2711.00%6,183,593
2034624,542,8641.00%6,245,429
2035630,788,2931.00%6,307,883

I won't go into the details about HBD that can have quite a big influence on the supply here.

In 2021, the supply of Hive tokens will increase by 7% only. From here the supply increase will gradually go down to 1% where it will stay after 2033.

Let's not forget that the US dollar supply increased by close to 30% this year !

What does this mean?

The Hive supply will grow slower and slower in the future. Every year the supply will grow by 0.5% less than the previous year. If the hive ecosystem grows by more than 7% this year, this will mean that the demand actually grows faster than the supply. If this is the case, this will have a positive impact also on the price.

The question really is: Will the demand for hive grow more or less than 7% in 2021?

With all the projects that are in the pipeline, I think it's really safe to say that the ecosystem will grow by more than 7%. But what happens if the number of users grows by 10% in 2021? What if the number grows by 50%? In these cases the effect on the price will be quite impressive I believe. For me this means, stake your hive and hold it. Now is the best time to grow your stake. It will never be that easy in the future!


Let's connect ! You can find me on these platforms:

Posted Using LeoFinance Beta

Sort:  

The way I see it, any time you can accrue an asset in a manner in which you will be able compound your earnings is the right time to accumulate it. When I am earning more today than I did yesterday and will earn more tomorrow than I did today, all without making a financial investment, how can you lose?

Posted Using LeoFinance Beta

I totally agree with this approach. The thing that people don't realise is that it will just get more difficult to accumulate because of how the supply is programmed. Today we are happy with 1 hive maybe in a year we will need to be happy with 0.5 hive. Whatever we can stake now is won in this respect :-)

!ENGAGE 20

And, hopefully, by staking now we can increase our HP to the point where even though the accumulation per HP is less, we are earning as much (or more) because we have more HP. 😁

Thank you for your engagement on this post, you have recieved ENGAGE tokens.

It will never be that easy in the future!

This is the key statement and I feel like it's spot on.
There's always the chance that Hive just does not go off for what ever reason but I think that risk is manageable. But if it does go off, you won't ever see the token price and supply as high as it is right now!

Posted Using LeoFinance Beta

The worst case scenario is that Hive doesn't take off and probably this would go hand in hand with a slightly lower hive price. The chances that hive grows or explodes are much higher in my opinion. I see that supply built in hive and also in hive-engine tokens tends to lead to a diminiushing supply in the future. As long at the ecosystem grows, this will lead to an increase in price.

!ENGAGE 20

Spot on! Although I'd say even if Hive does not take off, changes of the price going doing significantly during the bull market are pretty slim. So worst case value won't increase further :-)

Posted Using LeoFinance Beta

Thank you for your engagement on this post, you have recieved ENGAGE tokens.

This was great and I'm kinda biased....Stack while you can LOL

Stack while you can LOL

Exactly that is the mantra to follow :-). It won't get easier in the future!

!ENGAGE 20

Thank you for your engagement on this post, you have recieved ENGAGE tokens.

awesome post! i guess i need to accumulate as much hive and its tokens as i can in 2021

Posted Using LeoFinance Beta

Thanks:-). The way I see it, it will get every year more difficult to accumulate Hive and hive-engine tokens just because of how the supply is planned in the chain. We are still early in the game :-)

!ENGAGE 20

Thank you for your engagement on this post, you have recieved ENGAGE tokens.

Interesting insight, but there is also an inflation on the vests hold, like the vest increases in Hive value over time.

The best is to hold Hive as HP as even without voting it increases in value due to the inflation.

Posted Using LeoFinance Beta

The increase of the money supply is actually quite manyfold. In his post @dalz enumerated them as follows:

Reminder of the Hive inflation distribution:

  • Authors 32.5%
  • Curators 32.5%
  • HP holders 15%
  • Witnesses 10%
  • DAO/DHF 10%

The whole amount cumulated gives the numbers in the table above.

You are totally right, the best thing is to power up Hive and also use it to curate. In my opinion it will become more and more difficult to accumulate Hive in the future.

Thanks for stopping by!

!ENGAGE 20

That is for sure, times will be harder for accumulating Hive, one reasons will be if the users increase and also if the price is getting higher, less will be printed.

!BEER & !WINE

Posted Using LeoFinance Beta


Hey @achim03, here is a little bit of BEER from @alexvan for you. Enjoy it!

Learn how to earn FREE BEER each day by staking your BEER.

Thank you for your engagement on this post, you have recieved ENGAGE tokens.

Very nice detail summary on inflation. I didn't know about the current supply inflation rates. I do agree that now is the best time to accumulate HIVE. I converted most of my HBD into HIVE when we had that huge HBD pump. I don't know if we will see another HBD dump or not so I am holding onto my HBD for now.

I agree that decreasing supply of the token is not the answer. The answer to increasing the demand for HIVE is obviously the use cases. I personally think HIVE will continue to go up because of LeoFi, new microblogging platforms and smart contracts. With new users comes more demand for HIVE and our goal should be to attract and retain them in the block chain.

Posted Using LeoFinance Beta

In my opinion Leo is doing everything correctly and it will have a very positive impact on Hive. More accounts means more RC needed. More apps, more use cases, more users, this will all contribute to make hive grow and with it the price.

Another great plus for LEO is that it makes Hive so userfriendly that people have no problems joining it. That was the biggest obstacle in the past for hive to grow.

!ENGAGE 20

Thank you for your engagement on this post, you have recieved ENGAGE tokens.

!BBH 10

Posted Using LeoFinance Beta

I see Bradley has managed to set up the distribubot!!! congrats man and thanks for the BBH!

Lol. Not me. A couple new friends :) did all the work.

Command accepted!

Here is you BBH tip