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

Welcome once again to another wonderful episode in the crypto Academy community. Before I present my homework post, I would like to acknowledge the professors and the crypto Academy community for making such an educative lecture possible. Today the topic is all about your favorite concept with blockchain

About the Dip

The entire crypto community is facing a very huge calamity. The market is currently in a strong bearish trend. Most of the cryptocurrencies have dropped significantly. Just like what has been happening in the crypto market over the years, the market is facing a similar routine.

As we all know, the crypto market usually follows a sequential order. The price rises for some time drops to a particular liquidity level and rise back again. The current situation is no different from the usual sequence. The hard truth is that it is very difficult for people to accept the bearish market and adapt to the situation. Most people perhaps everyone in the crypto ecosystem would like to see only the bullish movements because every prefers profit to loss.

On the contrary, the crypto market certainly does not move in just one direction. Either the market is bullish or bearish or perhaps even sideways (when the market consolidates). Cryptocurrencies are highly volatile, guess we are all aware of that. The price could rise very high and equally drop very low. However, this extreme volatility usually occurs over a longer time frame.

According to the Dow Jones theory, the market trend happens in three phases. The primary trend, the secondary trends, and the yearly trend occurs over a very long period. To my knowledge, the market is currently in the secondary trend. With this type of trend, the trend lasts within a few months perhaps weeks. Trends also occur in 4 main phases. The consolidation phase or accumulation phase, the uptrend phase, the distribution phase, and the downtrend phase. The market is currently in the distribution phase of the secondary trend.

Causes of the dip

The Dip is caused by some controversies, as I said earlier in the post above, the dip is just a routine in the crypto. The market is currently in the downtrend phase of the secondary trend which means, the price would fall continuously for some months and or perhaps some weeks. Looking at the pattern carefully, we realized that before this huge fall, there was a huge rise as well.

One of the major causes of dips is fear. Due to the high volatility of cryptocurrencies, the crypto holders start to panic when they see some slight price fall and later sell all their assets. This leaves more of the assets in excess supply causing a price drop.

According to the media, some countries send cryptocurrencies during the war between Russia and Ukraine. Most people think Ukraine is a weaker side hence they need some support both financially and physically. During the war, all MasterCard was banned in Russia which leaves only cryptocurrencies to be used for transactions. All these facts have some effect on the dip.

The Luna crash has also caused problems to this current market situation. Luna Coin is the native token of the terra blockchain. Luna was ranked among the top 10 altcoins. Hence the crash of such a prestigious coin would cause some panic among crypto holders. Within the past few days, the Luna coin has dropped from about $80 to $0.001. This has caused many whales and crypto-holders to sell their holdings.

Why the Drop in Price of a Few Coins Doesn't Decrease Trading Volume

The average volume of the crypto asset falls when the asset is on a bearish trend. However, the volume of cryptocurrencies has less effect with a crypto price drop. This is due to the activities of traders. The reason why the average volume drop is that some traders begin to panic when there’s a bearish trend movement. Likewise, when the price is in a bullish trend, the average volume also increases since new investors would be attracted to purchase the asset to make profits.

The reason why the price drop also has less effect on trading volume is that, most of the traders who sell their assets during the downtrend later buy with the same volume or even a bigger volume. That price drop doesn’t necessarily cause a decrease in trading volume.

The Relation between the current Instability and the Luna coin

Luna is the native token of the terra blockchain ecosystem. When there’s any hindrance with the terra blockchain, the price of the Luna would certainly be affected. As I said earlier in the post above, Luna is one of the strongest currencies and was ranked among the top 10 altcoins ranking in the previous months. However, after the Luna crash, Luna's price and rank have both dropped drastically. This has caused more damage to the other altcoins. After the crash, most of the crypto holders were all in panic and fear of the other altcoins also crashing.

Most of the time, coins with stronger projects like the Luna coins are very difficult to crash. That’s why most holders have quickly sold their holdings. Moreover, the market was initially in a strong bearish trend while the Luna crashed alongside. This gives more reasons for holders to quickly hop out of the market to prevent any further losses.

Let’s just assume any of the coins currently in the top 10 altcoins also crash. For instance, when ADA also crashes, there’s certainly going to be a dip in the entire crypto market. Even if the market is bullish, we would experience some sudden drop due to the crash just like what’s currently happening on the Luna coin. But the difference is that the Luna happened in a bearish market that’s why there’s more panic in the market at the moment.

Talking of whether the Luna could bounce back or not, there’s absolutely no assurance of a bounce back. From my experience, no coin has ever dropped to this extent and bounced back at any moment. However, according to news from sources, terra is building a new blockchain called the forking network to run the Luna coin and also burning some of the coins as well to revive the Luna price. This is a clear indication that the Luna could bounce back. But technically speaking, all this news could also be scams as well.

The effect of the instability on steem

The dip has affected steem in many ways. Curation on the steemit platform is dependent on the current steem price. Any change in steem price affects the post payouts. Most of the steemians are getting stressed about the current steem price.

For me, the steem dip caused me a lot. My previous crypto academy post was curated by steemcurator02 for about $27. Even at that time, steem was about 0.35 so I thought there was a high possibility that the post payout would increase since steem was hanging around 0.4 to 0.45 dollars. But unfortunately for me, steem dipped to 0.15 dollars and the post payout dropped to about $16. The fact is that, if my post was curated the day of the payout with a $16 vote from steemcurator02 I wouldn’t be disappointed like watching my payout drop from 27 to 16 dollars.

Funny enough, this wasn’t the stressful part. After the payout has arrived, I thought at least I could get some 4 sbds which could be about 40 steem. But I had no sbd just 16 steem and 16 steem power. I was so confused until I reflected on one of sapwood’s lectures on how steem rewards are calculated.

But am still confident in the steem project and keep powering up to promote the steem ecosystem.