This is part 1 of a multi-part article.
Why Has the Price of Steem Dropped so Sharply in Recent Months?
It's a question that looms on our minds, especially those of us whom are deeply invested in the platform. In order to answer it, we must first ask why it got so high in the first place. I don't think there is only one answer to either question, it's very much a confluence of factors. However some factors are larger than others, and like any cryptocurrency Steem is subject to the influence of the larger trends in the crypto space.
Background: Crypto Before Korea
Bitcoin was long dominated by China, and it still is today in many ways. In 2013 the Bitcoin community began to notice a sharp uptick in nodes and hashpower coming from the most populous country in the world. Between 2014 and 2017, China dominated Bitcoin in almost every regard. The largest mining pools were Chinese. The mining farms were Chinese. The exchanges were Chinese. The money was Chinese. In trading circles, the common refrain when anything happened was "just wait for morning in China!". The only metrics by which China was not dominant, was that the Bitcoin development team was entirely Western and despite the popularity of mining and trading, Chinese people did not actually use Bitcoin very much for transactions.
Over that history there was a recurring meme of the People's Republic or the People's Bank of China about to crack down on Bitcoin. This was in almost all cases some kind of misunderstanding of a statement by some government official, and so it became widely regarded as a joke.
In late 2017, Bitcoin traders were still joking about this when major Chinese exchanges were being raided by the authorities, and shut down.
Today, China still largely dominates Bitcoin, but no longer in exchanges and no longer in terms of money flow.
Japan Legalizes Bitcoin
While this was happening in China, the reverse was happening in Japan. Both the Japanese state and public had long been skeptical of Bitcoin, with low adoption rates and interest, ever since the Mt. Gox controversy. Mt. Gox was the largest Bitcoin exchange in the world for many years, with almost all of the trade volume, and being based in Japan the crash of Mt. Gox coloured how people saw Bitcoin and cryptocurrency. However in September 2017, the same month that China shut down exchanges, Japan's Financial Services Agency officially recognized 11 companies as registered cryptocurrency exchange operators, a move which was widely reported as "Japan Legalizes Bitcoin". Not long before, major Japanese retailers had begun experimenting with Bitcoin with a major campaign to promote the use of Bitcoin in their stores.
Commentators at the time pointed out that it was very hard to find Japanese people who was actually interested or investing in crypto, although it was common for Westerners residing in Japan. Still, these campaigns and this change of tune had an effect on boosting interest in Japan. It had a much bigger effect on their neighbour however, South Korea.
Crypto in Korea
Interest in cryptocurrency had already been growing in Korea, long before the events described above. It was however very much an undercurrent. Exchanges were popping up in Korea and becoming popular since 2016. Steem experienced this when the first ever Steem/Fiat pair was added on Korbit, a relatively small Korean exchange. Volume was initially low, but Korean interest in Steem was high and it was less than a year before the Steem token was completely dominated by Korean trading.
The events of September 2017 in China and Japan were not the originator of the Korean crypto market, but they were a major catalyst. On the one hand Japan's legalization gave enormous legitimacy to the existing crypto trend. The fact that exchanges were being shut down in China brought in much public interest. It was a perfect storm, and in a few short months Korea became the first country in the world where cryptocurrency was truly mainstream. Steem was added to the largest Korean exchanges such as Upbit and Bithumb. In January 2018, Steemit.com was in the top 200 most popular websites in South Korea, with other Steem websites such as busy.org and steemkr.com popular in the country. Korea dominated not just Steem but cryptocurrency in general, with the largest exchanges now based in Korea.
So Why Did The Popularity of Steem in Korea lead to the Decline in price?
That will be answered in part 2, which
I hope to post this weekend you can read here. Upvotes for anyone who can help me correct grammatical and syntax errors in this post.