Basic economic principles are telling us that demand will increase. When demand increases, price increases.

Erm.. No.

It's a supply decrease. And this do not drive prices up.

Here is how it works:

Person A is selling Steem for 10 0.2 USD
Person B is selling Steem for 20 0.3 USD
Person C want to buy 20 Steem for 0.2 USD only.

Person C get 10 STEEM for 0.2 USD and now there is a 10 steem 0.2 USD order.

Now, there is a "stand-off".

If another Seller enter the market, he will sell for 0.2 (supply increase)

Price only rises to 0.3 if another buyer enter the market (demand increase).

Now, supply decrease only make a difference if sellers percieve that there is a demand increase. Since there is a shortage of the 'good' on the market, sellers will try to make more profit.

Decreasing supply do not increase the price, if there is no demand.