Thank you so much for this long awaited explanation. Much needed in my case. In summary, there are different supply-demand dynamics between the internal and external markets. Increased demand in an external market can raise the price of Steem THERE while the price of Steem remains low on the internal market which gives the arbitrager an opportunity. Sell Steem outside, buy Steem inside, then sell that Steem outside. But most importantly this dynamic makes the internal markets into a kind of anchor which drags down the price of Steem on external markets. If I could emjoji applause I would :)
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thanks for the kind words
The important thing to take away is that the feedback mechanism between the internal and external markets... Because of people exploiting the arbitrage, the (lower priced) internal market is able to pull the external market prices back down when they start to go up. There have been a couple of times ive watched at least a small recovery started, then be smacked back down by arbitrage volume.
Great point, I amended my initial comment to highlight that point.