Which Came First, Price or Activity? A Vicious Circle of a Blockchain-Based Social Media in the Bear Market (Extended Abstract)

Abstract

This paper explores the relationship between the user activity on Steemit---the most widely used blockchain-based social media---and the price of STEEM---the cryptocurrency that can be earned from the activity on Steemit. Users can get STEEM by writing posts or upvoting ("liking") posts on Steemit. One may expect that activities on Steemit may affect the STEEM price, or conversely, the STEEM price may affect the user activity. We measure the Steemit activity by DAU (Daily Active Users) which is calculated as the number of unique users who write posts or comments on Steemit each day. We conduct the VAR (vector autoregressive) model analysis and the bidirectional Granger causality test on the STEEM price and the Steemit DAU for three different time regimes: full, bull-market, and bear-market regimes. We show that in all regimes, the STEEM price Granger causes the Steemit DAU. Conversely, the Steemit DAU does not Granger cause the STEEM price in both the full and bull-market regimes. In contrast, in the bear-market regime, the Steemit DAU Granger causes the STEEM price. That is, the STEEM price and the Steemit DAU Granger cause each other in the bear market, which can be seen as a vicious circle. We also show that the same results hold with the Hive blockchain, which is a fork of the Steem blockchain.