Crypto Academy Contest / S1W4 – Reviewing the Instability of the Crypto Market by @temitopef

in SteemitCryptoAcademy2 years ago (edited)

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Hello Steemians. I am very happy to return to the academy to continuing my participation in the engagement contests. I have done one in a community this week and today, I am writing in the academy to write a very important topic about the current instability in the cryptocurrency market which has made many investors to lose their money. The questions would be taken one after the other.


Cryptocurrency current market decline

The decline of the cryptocurrency market has persisted since the year 2021. On November 8 2021, the biggest cryptocurrency in the crypto space which is Bitcoin dropped from $69K, following that fall other cryptocurrencies joined the move as a the bearish phase of the market began in the crypto space. The market of many cryptocurrencies have not been able to reach their all-time-high since then.

Furthermore, the fundamental analysis from different sources about the historical price behavior of cryptocurrencies, it's believed that the crypto market has always been bullish in February but in this year 2022, that theory didn't work as the market continued been bearish, a little bullish in March before it fell to continue the downtrend. In recent days, there was a sharp decline.

Early around the 9th of this month, the cryptocurrency market declined sharply and through that investors' positions were forcefully closed which led to a lot of losses. The decline market sends the price of Bitcoin down to $26,000, the first we have seen in recent months and many other cryptocurrencies dropped to up 100% in 24hrs in the bearish market.

The Causes of the Sharp Decline

There are more to this side of sharp decline of the cryptocurrency market with different opinions from experts all over the world. The most meaningful to me is the increased inflation rate, and the Fed's increase of the interest rate with half percentage, this poses a huge threat to the future of cryptocurrency.

Furthermore, the war between Russia and Ukraine looks like it's not ending yet, this has been the cause earlier before and it tends to add up to the present situation more. Also, a conspiracy of manipulations by two companies that uses Luna and UST for the deal is also a big factor to consider and I will talk about it where it's asked in the contest for today. All these are some of the reasons I think there was a sharp decline in the crypto market in the recent days.

How long the downtrend would continue

I believe the downtrend will still continue for sometime, maybe a few more days to weeks, the instability will still remain (prices switching up and down). The cryptocurrency market will eventually find a bottom that will act as a support for the market as the space would have adjusted to the current situation. That will be a time when traders will have the trust in the crypto market, then the market will go bullish again as stability would gradually return to the crypto space.


Why doesn't this drop in the price of a few coins decrease their trading volume (eg: Bitcoin)? How will they deal with this market instability?

Trading volume has a direct relationship with the price of any cryptocurrency as it measures the degrees of buying and selling the digital asset. I believe the decrease in the price of some cryptocurrencies has not affected their trading volume because investors have not completely taken away or converted their assets into another.

Furthermore, in this kind of market, investors look for opportunities in different positions, the decline of the market does not mean that trading has ceased or trading volume will reduce greatly, that is because the investors are still putting their cryptocurrencies to work in either positions, long or short and this contributes to the trading volume of the asset. So that's why the decline has not necessarily affected the trading volume.

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Information on Coinmarketcap

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Information on Coinmarketcap

Bitcoin for example in the images I uploaded above, the trading volume of Bitcoin through the historical price on the 2nd of May, 2022 was $32B when the price was $38K, the trading volume on the 16th of May, 2022 remains within that region ($32B) when the cryptocurrency was trading at $29.5K which shows a uniform trading volume. Furthermore, even today (17th of May, 2022), the trading volume was still around $30B when Bitcoin was trading at $30.5K. This shows that no significant changes has occurred to the trading volume despite the sharp decline of price.

The instability continues and the only way it can be handled is via continuing interaction by the investors which is holding up the trading volume. I said it earlier that it would continue like this until the market generally finds a support where trust in the crypto space can be restored and many traders get involved in trading of different assets again.


What is the relationship between the current instability and the downfall of the Terra ecosystem and its Luna currency? Do you think its price will bounce back? If so, tell us how and when?

The recent sharp decline of price or instability in the crypto space was also believed to be manipulation after two companies were accused of borrowing 100K BTC from an exchange, exchanging 25% of it for UST. The companies were said to contact Terra Foundation that they would love to swap a huge BTC for UST (TerraUSD) so that they don't cause market crack down.

The revealer of this anonymous information added that large amount of UST was given in exchange which lowered the liquidity of UST reserve to break below the $1 peg. At that time, the accused performed the deal and crashed the BTC market as many positions were displaced. The information also made known that Anchor, a holder of huge LUNA operates a scheme and the slippage forced many users to withdraw their funds which further crashes LUNA and UST. The attackers will be able to buy Bitcoin back at lower price and pay their debt with many profits in their purse. Read more about the issue.

LUNA went from the top back to the point of nothing, a shitcoin at that. It's sorrowful experience for the holders of the LUNA cryptocurrency. So many believed that this conspiracy is the reason for the huge fall of the market. The block production on the LUNA network halted for sometime, Binance exchange suspended its trading. Some of the LUNA pairs was reinstated on Binance later. During those periods, many investors sell other cryptocurrencies thinking it's an end in the crypto space and that affected price generally.

Would LUNA bounce back?

My answer to this is YES but steadily. LUNA shared their revival plan as they will be burning 65% of the total LUNA supply and distribute to the holders of LUNA and UST in the ratio of 1:6500. There are concerns that this method can only help LUNA price to bounce back a little, it would take a longer time to return the investment of traders that bought the cryptocurrency above $1. We can start seeing the effect of the revival plan in the next few weeks.


Our Steem ecosystem, like most currencies, has been affected by this market downturn, has this caused you as a user some stress? Or are you still confident in this project? Give your opinion, specifying the arguments that support your review

Truly, the decline in the cryptocurrency market has affected the price of Steem cryptocurrency as the price moved down from $0.38 to $0.15 during the hot of the recent bearish phase of the cryptocurrency market. But during those period, the price drop in percentage of Steem is less when compared to the other cryptocurrency's fall. The payout of the authors on Steemit at the moment doesn't include SBD for now which I believe it's the effect of the sharp decline in the market as I have read in some posts.

I am not distressed about Steem because I am very confident about the project, Steem's market is steadily going bullish in the market again and getting closer to the price it was before the decline. Furthermore, Steem is a utility social media-based token which its use-case can't be underestimated, investors will keep interacting with Steem and it would help the price to keep growing. For this use-case of Steem, it is a cryptocurrency with a bright future so I am not distressed, I trust Steem.


Conclusion

The market of cryptocurrency experienced a sharp decline in the last few days which caused a huge instability, many investors lost a lot of money during the period yet the trading volume stands firm because investors are still looking for opportunities in different positions. Steem was also affected but it would always be a relevant cryptocurrency because of its use-case, the project is a reliable one with good team behind it. It's a very good contest organized in the academy and I love it. I will like to invite @jueco, @patience90 and @patjewell to participate in the contest.
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Thank you! You have done well with your article.
I've been keeping a keen eye on the market this last week.
I'm sure that the recovery is not too far off.
Thank you for the invitation!

 2 years ago 

I'm happy that you honoured my invitation. Time like this occurs in the market and we have to be prepared for it. Yes, the recovery phase will come as stability returns gradually. Thank you ma.

 2 years ago 

A well written report, the dip had also gave me serious sadness and depression but I thank God the market is recovering fast

 2 years ago (edited)

Bearish phase of the market is usually a frustrating one for investors, I felt it too but the market is recovering little by little. Thanks for stopping by.

 2 years ago 

This is a well detailed post on the instability in the market,you have taking ur time to study the market.

I am still optimistic that the cryptocurrencies market in general will bounce back soon.

I wish you best of luck in this contest👍

 2 years ago 

Thank you friend. Truly, I spent many hours to read about the current state of the market and I am very happy that I can come up with a post in this contest. The market will bounce back as time goes on. Thank you once again friend.

 2 years ago 

U wlcm💯

 2 years ago 

This is a comprehensive details of the questions asked, the bearish phase will continue for a while until it find support, the luna and ust saga has been the top trend in the crypto space, I qs fortunate to see the price go down, all this has shaken many coin but it is normal in the crypto world, user need to know that there are two phases in the crypto market, if the position is bearish except the bullish and vise versa

Alot has been said in this post and i cam say you are not one of the naive crypto lover, I see confidence in steem token as you do mate.

Steem on

 2 years ago 

The fall of LUNA and UST is a very bad one that liquidated some investors, it must be one of the unpleasant ones that I have seen in this crypto space after the popular squid token last year. You are very right friend, bullish or bearish one should expect that in the crypto space. Furthermore, Steem token is a very good project, it will grow bigger in the crypto space. Thank you for appreciating my post for the contest.

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