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If it's a fading hobby then why am I still bidding against so many people?
Because you are amongst the core collectors of the hobby that have disposable income to spend on stamps and are willing to compete against others for desirable items. In other words, the "serious" collectors, not casual or transient collectors that make up the majority of any hobby. Stamp auction participant numbers are really not indicators of a hobby's overall health. Imagine if the popularity of a hobby was based upon transaction values whether it be cars at Barrett-Jackson or stamps at Siegel. The Bill Gross's and Rick Hendrick's of the world spend tens of millions on their hobby's, but they alone can't make those hobbies vibrant.
I do think that the number of Ebay sold results in the stamp categories paint a picture of a hobby that is holding its own. The question is "is the hobby growing?".