Why SPS "Goes Down All The Time"
Let's talk about SPS and why it keeps going down.
If you follow the Splinterlands Reddit or go on the Discord, you'll see over and over again people asking the question of why SPS keeps going down. This question hasn't lowered in frequency since that first ramp to over $1 right after launch had its epic retracement back to Earth.
(For the record, I fully expect we get back over $1 within the next year if everything is managed properly)
At the time I'm writing this, it's actually up a little from a low of .19 a few days ago up to .27 amid today's crypto recovery post-Fed speech.
Every time I see it asked there is someone in the comments who pieces together some phrase that sounds like this "Any token that is given out daily is going to constantly go down in value. What do you expect?"
I'd like to talk about this for a second because ultimately it's not true. However, the actual truth is very important to understanding more than just SPS but the entire Splinterlands economy.
First, let me address why I say it's not true.
Supply increasing, even if increasing daily, only sends prices down if it that supply outstrips the demand.
The Yieldly Proof
Here's another coin I own that gives out daily rewards at an even greater rate called Yieldly. This coin came out a few months before SPS and I've been holding it since day one.
YLDY is similar to SPS in that you get it by having a different coin in your account (Algorand) just like you get SPS mainly from having DEC. You can also stake your YLDY and get staking rewards. Those rewards started astronomically high and come down the more YLDY is staked, just like SPS. Also, rewards on YLDY happen daily just like SPS.
Here's a chart of YLDY:
It actually took about a month for YLDY to get picked up by Coingecko so you don't see the initial ramp from .002 to .005 here but you can see, it doesn't just go down.It went up, steadied out, went up huge, came back down about halfway into a nice bullflag pattern where its now threatening to make its third major leg up. (Not financial advice)
Now to be fair, SPS doesn't just drop every day either. It bounces around and sort of maintains a floor in the low .20 area but its highs are compressing lower. It does look like it could be ready to break above that area right about the time when SPS staking could become more valuable though so...(not financial advice)
So why then do I believe SPS is more inclined to drop more than it rises while something like YLDY which is also given out daily, doesn't?
If you can understand the answer I'm about to give, you can understand the Splinterlands economy and what needs to be done to get it back on the right track.
When it comes to the financial side of Splinterlands, there are two types of players.
There's the person here for income. (Wage earners)
There's the person here for long term value. (Investors)
People who stake their Algorand to get YLDY are of the investor mindset. They are in it for the longer term value. The expectation is that over some amount of time, the value of what they have is going to increase so they will hold onto it unless a better deal comes along.
In splinterlands though, that makes up a very small percentage of players. Many players might dream of becoming a whale one day but what they actually do is play for income. When they win a card they immediately put it up for sale. When they get SPS they cash it in.
Many do this strategically. I mean, if you want more SPS to cash in, it's actually a great idea to hold DEC which has a better SPS payout rate than holding SPS does.
Also, they may buy a card that will help them win more and farm more income overtime. And in buying that card they are probably thinking about the fact that its price could go up in the future.
So it's not completely just play, win, cash out. If it were, those people would never get any SPS to cash out of anyway. But in most humans minds, we do things for the immediate reward. We aren't investors, but wage earners. And when we get our wage, we spend most of it while hopefully putting a little bit away from later.
That's what splinterlands is. And this is why the whole value of the game revolves around rewards being worth playing for.
As soon as the idea of immediate pay off ends, the core players of Splinterlands become less active.
And if investors don't see the core players maintaining activity levels, they don't invest.
I say this because I've had SO MANY people tell me now that by looking at the state of daily rewards as an indicator of longterm health of the game I'm being shortsighted because all that really matters is how rich everyone will get from the HODL. But this is a mistake.
There is no long term value growth unless the short term players are happy and multiplying and eventually some of them start transitioning into investors themselves. The short term is what becomes the long term and right now the short term rewards is not supporting either and it shows.
Now there's a bit more to go over with SPS. Like the fact that it's not actually the best thing to hold if you want more SPS. Or the fact that you can sell the SPS and buy cards to help you transition from wage earner to investor.
But the belief that it goes down simply because they give it out daily is misguided but oft repeated lore.
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very well thought out. I'm relatively new and have no idea about the future except what my gut tells me. I like playing the game at a low level daily but I dont see my self playing in higher leagues. I wonder how long other new players will remain super active.
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Thanks! I stick with the low levels of play too. New players will stick it out as long as they are rewarded well enough for doing so and regardless of what level they choose to play at.
Devs need to get those rewards back up while those new people still are super active and primed to tell their friends.
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The token was just introduced and really doesnt have a use case as such. That will change in the future.
Things take time.
Seems more Bitcoin is on the market each day, something that took place for the last 12 years. Yet somehow it managed to increase in value.
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Exactly this.
Most serious tokens have some form of a release schedule that increases supply steadily over a given time.
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I agree that adding supply is actually healthy and necessary to growing the overall network, but the amount being put into the market on a daily basis right now is definitely impacting price. They could have just dropped the entire amount on the market at once and it would have taken months for the weak hands to be weeded out and have the supply eventually gravitate into the long-term hodlers hands. By doing it this way, they are helping it maintain its value and broadening the distribution in a very big way. It will still take time to eat through that much supply coming into the market on a daily basis, but the user base keeps growing and eventually I think you'll see the price start to climb again. Probably as we get closer to the end of the airdrop.
As far as comparing it to Bitcoin...it basically took 4 years before it ever really did anything. We're in month 2 of SPS...
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Who should have had it airdropped to them? Just the like 10,000 people who had accounts at the time? The airdrop was done this way for a reason. To get the largest amount of people involved over time and to encourage continued growth instead of a giant pump and dump that lasted a week and left a few people with the entire supply.
The thing about this coin is right now the use case is based on the percentage of the total supply at the time held.
Let's take vouchers for CL packs as an example. If they said you get one voucher for every ten tokens you hold, the added supply would make it much easier and therefore cheaper to get the amount you needed for the amount of vouchers you wanted. But that's not what they are doing. Instead they are giving out a fixed amount of vouchers based on the percentage of the whole each person has at the time. If the supply is bigger it means you need even more to keep the same percentage and get the vouchers.
And I don't think anyone is comparing it to bitcoin in all possible ways. Clearly there are differences with bitcoin and how it developed that extend far beyond price movement. The point I think was just that supply is constantly added and it still goes generally up.
Supply doesn't happen in a vacuum.
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Ok. I hear what you're saying, but then give me the answer to one question: would the price of SPS be going up if they were NOT giving it out daily? Leave everything else the same. Would cutting off the supply make it more valuable?
If the answer is "yes", then while many of your other claims may also be true, you can't dismiss this fact as being very relevant to the current price situation.
While I agree the rental market is down and prices are down, in my mind it's because they are flooding the market with supply. If they want new users to keep pouring in, they can't allow the prices to continue to skyrocket. Those new users will vanish as soon as they see they can't compete unless they fork out hundreds of dollars.
As much as people who got in early love the amount of money their card collections have turned into, this can't be a Ponzi scheme where all the new investors are used to cash out the old. Values will have to come down so they are accessible to the masses. There will be supply shortages again once the current rewards cards start dwindling and the Chaos Packs are sold out, but until then it seems to me that the devs need to consider the pocketbooks of the new users over the already 10x'd plus pocketbooks of the early adopters. Just my opinion...
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If they stopped giving out SPS right now, SPS would probably plummet since about 80% of the reason people hold SPS is to get more SPS. Staking rewards is a big reason many coins stay up while they build their future use cases. Just like how many stocks stay up based on their dividend payout.
But that's all things being equal and nothing else changing. Besides that, it's impossible to answer the question around the airdrop because you are asking me to validate the fact that supply and demand exists while also ignoring the demand side of it by adjusting supply in a vacuum which can't happen. You're trying to prove me wrong by asking me to measure an impossibility.
OK, we agree that flooding the card market with supply is going to hurt prices.
But beyond that I have to ask you a few questions.
First, how much should my cards I spent $50k on be devalued to in order to satisfy the requirement that other people can buy them for cheap now? Am I allowed to profit ever or did I get in too early?
Second, at what point have enough people come in that we can now let people profit off what they bought and/or spent time building? Is it 1 million people? 10 million? 100 million? At what point will we think they have enough inventory each to allow prices to rise?
Third, where do you think the rise in value all those old school players cards came from? Holding and magic or other people coming in and buying those cards at these prices who are now sitting on them and hoping to profit some too? Do those people who just came in and generated all the excitement matter? Or are they not the masses?
Fourth, can you tell Apple I would like to buy 1% of the company for a reasonable amount I'll figure out later? Based on everything I now know about Apple and their business, I know its a proven solid investment
that I would have bought back in 2001 had I known what I know now. I just think that if they don't let people buy in cheap, new people aren't going to buy and the whole thing is going to collapse so its in Apple's and in the old investor's best interest to sell to me cheap.
Fifth, if Apple doesn't sell me a good chunk of the company at what I deem fair, is it now just a ponzi scheme where new money cashes out the old money that got in earlier than them and took more of a chance?
Sixth, if we make sure the masses all get in with the amounts that they feel they want and deserve before we let prices go up, what then would be the driving force to send those prices up when we finally let them float free in this game where half the pitch is that I get to own my cards and profit from them?
I'll spare you the next 15 questions I have.
Splinterlands doesn't need its prices to fall to some arbitrary amount where you believe the masses will be able to buy in. Prices were down down there when I started playing and the masses were nowhere to be found. I didn't buy much either back then. Why? Because it wasn't a sure thing. Riches weren't imminent. There were better things to spend money on when Splinterlands wasn't growing in value.
People buy in when prices are going up. That's what bull runs in stocks and crypto and the housing market are all about. They sell and go away when prices are falling. Those who take a chance on the scary and not exciting thing take a big risk but when it pays off they get a huge reward.
People here years before me spent thousands of dollars and thousands of hours on something that showed no promise to almost anyone who looked at it. They kept the game going. They made it possible for new players to come in. They took a real risk for the love of the game and a belief it could be more. Now that it paid off they should be pushed to the back so new players can buy in cheap when it looks like a sure thing?
If markets are too expensive, they tend to fall on their own. They don't need to be pushed off a cliff or centrally managed.
Splinterlands has onramps for new people that aren't expensive. It's $10 to start and you get a full deck with copies of some of the most expensive cards in the game. Then there's a rental market that is overflowing with supply and dirt cheap.
The idea that cards have ever been of short supply in splinterlands (let alone will be again) is misguided. We have more players than ever before by A LOT yet here are two stats that should disprove that if you think cards are scarce.
There are currently 75 different cards you can buy for under $1 on the open market and some are under .10 cents. More than 75 if you're willing to do some legwork and go check other markets or put in some bids or join a facebook group and talk to people.
There are 173 different cards you can rent for 1/16th of a penny per day right now as I type this.
There are only about 380 different cards in the game and you can get almost half of them for .02 per month. That's not a supply shortage that needs fixing. That's a flood of oversupply that needs to be sopped up.
So what is it new players don't have access to? They can't own the rarest cards for cheap or play at the highest levels without dropping some cash like so many others of us did? I spent $50k and there are still cards I wanted but couldn't buy. I guess I'm owed something?
Do we really need to prioritize destroying the value of the game that the people who have actually invested huge amounts of money and time into when it wasn't a sure thing have built so new players can get in cheap now that it is a sure thing?
And at what point do those new players get bored and stop playing when the money and time they spent isn't rewarded because the train can't leave the station until everyone is on board and happy and technically, they were pretty early too compared to people who haven't yet joined.
I'm sorry but this idea that price can't go up because its not fair or some people might not play just makes no sense to me. One it's not true, and two it's just not how anything else in the entire world works.
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It hasn't many use cases still but they will be adding them possibly as happened with tournaments entry fees and rewards. Actually we're to soon in the airdrop in this sense is natural that the value is still low. I guess that when lands come SPS will be needed to craft things and upgrade buildings, that's what I would do to add sinks for the coin.
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