Read part 1 of this 2 part article here
South Korea's Uneven Relationship with Crypto
In part 1 I discussed the circumstances around the rising crypto market in Korea during the last few months of 2017, and how South Korean exchanges came to dominate the trade of cryptocurrency.
While South Korea dominated the crypto market generally, it's important to note that the degree of dominance was not even across the crypto market. Firstly, it was largely only the trade of cryptocurrency tokens. Koreans were buying and selling cryptocurrency en masse, not just as a fringe movement but very much the general public. However China, in particular Bitmain, did not lose any ground when it came to mining cryptocurrency. In dollar terms, the vast majority of new cryptocurrency is still created by mining, because the largest mining-based cryptocurrencies have by far the most market share. The four largest mining-based cryptocurrencies* in December 2017 held 80% of the marketcap share.
When looked at in this light, the phenomenon of the 2017 crypto bubble was in fact a large transfer of wealth from Korean speculators to Chinese miners, mining pools and earlier speculators. This is corroborated by the absolutely phenomenal profit reported by Bitmain, $4 billion in profit during 2017 and over $1 billion in Q1 2018.
More importantly however for our topic is there were greatly different degrees of dominance by Korea across different tokens. For example, despite Bitcoin growing faster than most altcoins in the second half of 2017, Korean exchanges were only responsible for about 10% of Bitcoin trading in December 2017. There were other coins where Korea was far more dominant, for example about 20% of Bitcoin Cash trades were on Korean exchanges.
Korea and Steem
I've shown that the Korean market was a larger influence on some coins than others, but Steem was one of the coins that was most heavily dominated by this single market. Not long after Steem was added to Upbit in December 2018, the trade of Steem and Steem Dollars were completely dominated by Korean exchanges. At times they had over 70% of the trade of Steem tokens, and to this day they are more than 50%. Aside from dominating trade of the Steem token itself, they were completely responsible for the massive over-valuation of the Steem Dollar, which was as high as $15 in December 2017. This excessive price gave holders of Steem Power far more purchasing power if they self vote, and presumably this contributed to the peak Steem price in January 2018, a month after the overall crypto bubble had peaked.
With virtually all the capital going into Steem coming from one market, this made Steem especially vulnerable to a decline in interest from South Korea.
Google Trends
Let's take a look at how search interest in cryptocurrency has gone over the last year. This is worldwide interest in Bitcoin:
As you can see there was a massive peak in interest heading into December, but it sharply declined, to the point of less search interest than even before the bubble. The same pattern is common across most cryptocurrency. Here is Ethereum and Bitcoin Cash for example:
Ouch, especially for Bitcoin Cash, but those two have not dropped in price as much as Steem.
So what about Steem? Well actually, worldwide it's not so bad. There's still about 24% the search interest in both Steem and Steemit compared to the peak in January. That's a much lower drop than most of crypto.
Things change quite a bit when we look at South Korea only though.
Ouch! Not only was Steem especially vulnerable to a decline in interest from South Korea, but South Korea has lost interest in Steem far more than the rest of the world has. They have lost interest in Bitcoin too, but Bitcoin was far less vulnerable to this.
Why Did Korea Lose Interest in Steem?
On this, I can only speculate, so take it with a grain of salt. In my view, cryptocurrency does not have much to offer people in South Korea. For the most part, this country is a well functioning economy. The banking system serves people pretty well, bank fees are not a major cost, access to banks is not a luxury, movement of capital is not as strictly controlled as some of its neighbours and there is little fear of currency problems.
The Korean rush into cryptocurrency in late 2017 has all the classic markings of a financial bubble. Retail investors and ordinary people investing money into things they don't understand, on the belief that the market will keep going up. This kind of speculative run brings a lot of capital into the space, but it is poor foundations for when the market inevitably turns. Those with little real world purpose for the tokens have no reason to hold onto them, and rush for the exit when they see that's what everyone else is doing.
Don't get me wrong, there is some benefit to Steem for South Koreans, especially as a social network. In fact, despite the declining interest, they are still the number 1 country for traffic to Steemit.com on a per capita basis. Steemit.com is ranked 376th in Korea on Alexa.com, compared to 1817th worldwide. However Steem and cryptocurrency don't solve any hard problems in Korea. They offer the chance to get rich, but that will only be a stable thing when there is demand for crypto other than to get rich.
Korea vs Venezuela
By contrast, let's take a look at Steem in Venezuela. This is a country with real financial woes. Local currency is unstable. salaries have crashed in value due to hyperinflation. It's hard to get cash, it's hard to import goods from foreign countries and it's hard to earn money. In a country like this, interest in Steemit** has held up quite well.
Not only that, but it has held up extremely well against other cryptocurrencies.
As far as I can tell, Steemit is more popular than any altcoin in Venezuela. The only crypto I can find which is more popular is Bitcoin itself. Web traffic to Steemit.com is also high.
Venezuela is not a wealthy country. We won't see huge amounts of money coming into Steem from Venezuela any time soon. However, it's places like this that are the source of real utility, real value for cryptocurrencies like Steem. When Venezuelans do fully embrace cryptocurrency, and they seem to be choosing Steem, it will be a far more stable foundation for the Steem economy.
Thanks for reading my post. I had intended to get this out yesterday, but I discovered that for me it's still technically the weekend today, as it's a bank holiday in Isle of Man. As with part 1, upvotes to anybody who can correct grammatical and syntax errors in this article.
* Bitcoin, Ethereum, Bitcoin Cash and Litecoin
** I have chosen to highlight Steemit instead of Steem because in some places, seemingly Venezuela included, people know it by the website name not the token name. "Steemit" is frequently used to refer to both the site and the cryptocurrency
Hola @demotruk. Soy venezolano. Definitivamente el valor del Steem no es el mismo en Corea que en Venezuela. Como bien lo dices, y resumiendo el planteamiento, en Corea no necesitan tanto una criptodivisa como aquí.
Steemit y su monedad o Steem y su red de blogging social, como mejor te parezca, han ayudado mucho a nosotros los venezolanos. 1 steem actualmente está por debajo del dolar, pero por ejemplo, cuando ha estado a la par del dolar, entonces estamos hablando que el precio de un Steem es de 84 Bs. eso equivale a comprar 1 kilogramo de pollo, por ejemplo o 2 litros de leche. Tu dirás, "pero entonces no es rentable", te digo que sí lo es porque el sueldo mínimo estaba hasta hace 15 dias en 55 Bs. Osea, que 1 $ ganado en Steemit equivalía a más del sueldo mínimo.
Imagina entonces que un venezolano se gane 20 dolares o más al mes en Steemit, la cantidad de dinero fiat sería enorme. Por eso en Corea les vale verga ahora el Steem, pero en Venezuela sigue siendo popular.
El Steem es la pepita de oro que todos quieren tener, es triste y quizás hasta humillante, y digo humillante porque gracias a nuestra desgracia nos ven como la tierra abandonada de Dios.
Muchas gracias por tu análisis y los datos aportados. Material como este además de ser interesante es muy útil para la plataforma tiene mucha importancia y más aún si buscamos conocer y entender sobre todo lo que rodea a Steemit y su Steem. Los venezolanos vamos creciendo aquí en el óceano steemiano y seguiremos aumentado para hacer nuestra mejor parte en Steemit.
La grave situación de Venezuela es incomparable con Corea, y por esto para muchos venezolanos el tema de criptomonedas a tomado fuerza, pero en especial el Steem se ha vuelto popular. Muchas personas quieren acceder a esta criptomoneda, muchos quieren solventar necesidades personales, por eso elogio más a aquellos venezolanos que están en la plataforma porque realmente desean tener una forma de trabajo y de ingreso que les permita cubrir gastos básicos para ellos y su familia.
Es lamentable la situación que vive Venezuela, esta grave problemática nos ha llevado a incursionar en nuevos proyectos que se puedan convertir en un modo de vida, que nos generen ingresos económicos. El bolívar (nuestra moneda) se ha devaluado tanto que hemos entrado en una fase que nunca habíamos imaginado vivir en esta época moderna.
Como mujer venezolana y profesional, manifiesto que Steemit y su Steem están ayudando de gran manera a muchos venezolanos, pues no importa que tan poco sea lo recibido ya que representa más de lo que nos puede dar la moneda venezolana tan devaluada hoy.
Para finalizar, debo agradecer tu aporte con esta publicación y el hecho de tomar en cuenta a Venezuela, un país rico, y solo en este punto difiero de ti, aunque entiendo lo que dices cuando mencionas en tu publicación:
Entiendo que no representamos rentabiliadad para nadie y más en estos momentos, pero nuestro país en materia de riquezas naturales e hidrocarburos, como petróleo, gas, oro, bauxita, entre otros y ocupa el primer lugar o al menos primeros puestos en el planeta, sólo que eso nunca ha valido de nada para el país y su gente, gracias a los políticos corruptos que nos han gobernado. Ellos si han sabido sacar el jugo a todas nuestras riquezas. Que ironía que seamos un país con tanta pobreza.
De nuevo gracias por tomar en cuenta el nombre de Venezuela como tema de tu análisis. Es verdaderamente valioso para la comunidad venezolana en Steemit. Queremos dar lo mejor de nosotros para el mundo.
I'm from Venezuela, and I can tell you that here there are many people adopting 100% cryptocurrencies, I am one, I have 99% of my capital in cryptocurrencies, some say I'm crazy for doing something like that, but I really have more confidence in the cryptocurrencies than in the national currency.
For two years I have been investing in cryptocurrencies, at first it was just Bitcoin, then others came, later, last year, I discovered Steemit, and I joined the platform, I was surprised to find many Venezuelans here, and not only that, but also they use Steemit as a MAIN source of income.
I imagine that in Korea things are different.
I'm also from Venezuela and I have to tell you how big Steem is, along with Bitcoin and Dash, Steem is in the top of the cryptocurrencies here. You can check that there's a lot of communities from Venezuela and everyone is really taking advantage of this platform. It has been a blessing for us to have this as a valid option to get some income. Good article!
Only $6 for this legitimately great article is a sin. Read with interest from start to finish. Good job.
My resteems don’t do much, but have one anyway.
Good info. I wonder what percentages of users on Steemit are Koreans.
According to Alexa.com 13.4% of visitors to Steemit.com are from South Korea.
They are also the largest group for busy.org and steemkr.com
“cryptocurrencies will proliferate to every economy and every part of the planet” - CFTC Commissioner
This is already happening in Venezuela as you pointed out, and I'm sure we'll see a similar trend in other developing countries over the next few years.
Thanks for sketching out the bigger picture. If only from all that crypto money ($4 billion in profit in 2017) people on the streets like in Venezuela could profit!
Steem and Steemit seems to do really well in a few countries, but we need it to be big everywhere. I think it could have big positive effects in countries with high inflation and/or expensive money transfers as long as people can spend it. Steem is more useful for that than many other crypto coins. It's going to be interesting to see how it goes.
In the long run yes, but in the medium/short term I don't agree. If we can take off in one single economy, such that Steem is the basis of a full circular economy even in just a small area, that is a fantastic foundation to expand upon. It's stuff like that which brings real stability to a currency (people needing it for day to day use).
Growing in one country is good for now. Its interesting to watch how the web stats change over time. We need active communities around the world getting the word out
We need some more steem promoters.
Great article. Things did seem to be growing very fast at the end of last year and I was sure it wouldn't last. For Steem to be successful as a currency I'm sure it needs slowly and steady growth and not these big spikes otherwise nobody would use it for commerce.
You buy a cup of coffee today that is worth half as much tomorrow, nobody could rely on that.
Steem itself doesn't need to be that stable. Steem is the equity token in this system, Steem Dollars are the money token. It may come to the point that Steem is stable enough to be money and Steem Dollars are redundant, but I wouldn't expect that to happen soon and it doesn't really need to.
Sorry. yes I I meant Steem Dollars. I still believe that any crypto will find it difficult to be used for commerce if its price is so volatile.