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RE: 26% APR returns now available on Steem!
I noticed that, it is quite lucrative at the moment. Probably due to all these new tokens popping up wishing to create sinks and value cases. Doesn't bode well for the future, unless you're the one getting that sweet 26% return.
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Why do you reckon doesn't bode well? My take is that the lessee is taking a bet on Steem and willing to pay 26% to lease Steem Power, which increases the value and perceived value of holding Steem Power, I don't see the downside. A good indication of the growth of an economy is the size of its commercial and real estate financing order book.
It is great for the lessor, not so much for the lessee. Remeber, they also have to pay a 10% fee and don't get the Sp inflation. 28.6% per year is a tough yield to base an IRR off of for profitability.
There are lots of good business ideas, but not ones that can make 28.6% per year. Steem is 34 cents, 10k steem is a 0.1956 upvote, you get 10 a day, so say 1.956 to be generous as most won't be at exactly 100%. 10k steem costs 2860 per year to lease. 1.956*365 is 714 dollars. 714/0.34 is 2100 steem. Now remember you wil have to share some with curators and may be downvoted for so much selfishness.
I don't see why the market price went up above 21% except out of desperation or to run token based pyramid scams because the money is flowing in now and the markets are hot.
JMHO
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"I don't see why the market price went up above 21% except out of desperation or to run token based pyramid scams because the money is flowing in now and the markets are hot." - that is speculation though, we don't know what they are using it for but it could be for a central community account to support authors in their niche, or a game that needs SP for Resource Credits to issue memos and post custom json for game activities, or just a bunch of people that pooled some funds to see what it's like to be a dolphin on Steem for a month, there are lots of good usecases we could think of rather than first resorting to assuming the negative.
In any event if it attracts investors to buy Steem and power up to reap these high APR rewards, then awesome, if it causes existing Steemians to power up and lock up their stake in Steem to fill these rather than dumping into BTC then awesome again.
I can borrow money for 5% no problem, buy 10000 Steem on some exchange and transfer it to my account. Why would I borrow at 28.6%? It doesn't make sense and it is irrational. Even people with bad credit can borrow at 22%. I'm trying to wrap my head around it, but it doesn't make sense to me.
If money isn't flowing into Steem when there is 26% guaranteed returns, then it spells trouble. I don't care about SP, RC, JSONs, Games, etc. We are talking about money here, it's fungible and convertable. This is a liquid currency that isn't attracting enough long-term buyers so the internal interest rate has sky-rocketed beyond common sense.
Just saying, it doesn't bode well.
Because you get the inflation value (ie upvote power) of the leased token which is quit significant. So it has to cover normal loan cost plus loss of token inflation for the owner which goes to the person taking the loan and holding the steem.
You are forgetting the main use case for Steem Power, that is to get resource credits to transact on the Steem chain, create accounts, etc.
There is more than only "upvotes" to Seem
True, but that was also true when the APR on lease was 14%. I'm trying to think why it's so high, are we in junk bond status?
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Actually it is around 20% for a long while. Now that Steem is cheaper it is cheaper for outsiders to lease Steem Power to have influence on the platform.
Hopefully the external market will realise this and flow money into Steem, I think the risk with borrowing in fiat is you owe it back in fiat so if Steem drops to 1/3 of it's value you are in a spot of trouble, with Steem Power leasing you aren't borrowing capital you are borrowing a delegation which gives you the same utility as if you had the capital, but leased at a fraction of the cost. This is more like leasing a car via AVIS than buying a car with a bank loan, not sure if that is a better way of putting it.
Basically it is the difference between having to pay capital and interest repayments vs only interest repayments (which is actually a fixed lease fee) and not being on the hook to repay the capital.
Also less paperwork and KYC.
"I think the risk with borrowing in fiat is you owe it back in fiat so if Steem drops to 1/3 of it's value you are in a spot of trouble"
And there you have it. All the other reasons where there when delegations were paying less than 20%. Perceived future value is why people aren't buying Steem with other currencies and getting 26%.
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Mostly people are bullish on BTC I agree, and dumping alts to ride the btc wave.