When would demand leave though?

Because not everyone shares the same interests and they may not find their engaging connections here?

Because the rewards for most users will be less than $5 per month, i.e. meaningless?

Medium reports only 20,000 of its 25 million readers blog weekly. Blogging is not something everyone can do well. So what do the rest of the users do that is engaging?

The more likely scenario in that situation would be that the dollar/BTC value of Steem would approach zero.

Which would disincentivize cashing out at some level above zero, because of the cost of cashing out isn't 0.