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

Hi friends, it's another week of the steemit challenge in various communities and steemit crypto Academy is not left out. So I'll be participating here as we discuss the instabilities of the crypto market recently.

Most of the cryptocurrency market is currently experiencing a sharp decline, especially in recent days. What do you think of this drop? State its causes and how long do you think it will continue in this downtrend?

Crypto Market Decline

It's no news to crypto traders and enthusiasts that there is currently a massive dip in the crypto market as Bitcoin and almost every major crypto project is experiencing a strong bearish trend. This is not a new experience in the crypto market because we've seen similar scenarios in last few years where prices hit so low that most people started losing faith in Cryptocurrencies completely but after some time the market surges again.

Every knowledgeable crypto investor understands that the market does not move in only one direction but moves in different phases which includes the Accumulation and Distribution stages, and there will always be time for strong bullish markets and strong bearish markets. The crypto market is largely influenced by the mindset of traders and investors at the time (market psychology) as well as other fundamental factors like government laws, strength of crypto projects as well as sentiments which is mostly pushed in the media.

We have seen many cryptocurrencies drop more than 50% and few other like LUNA are already looking impossible due to the massive dip they've experienced. As a matter of fact almost every cryptocurrency has been affected and lots of money have been lost by investors as many are now trying to quit their positions so as to save whatever is left of their investments.

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From the BTC/USDT CHART above we can observe that the market has continued to record lower highs and lower lows with some retracements which is usual with bearish markets. We cab observe that Bitcoin was priced around $60,000 at the beginning of the year but is currently trading below $30,000 and still showing signals of dipping even further.

Similar bearish structures can be observed in various cryptocurrencies including Ethereum, AXS, SOL, ATOM, HIVE, STEEM etc.

Causes of Decline

There are a number of reasons that led to the current situation in the crypto market which also include fundamental, sentimental and technical factors as they kind of work together in this scenario.

• Firstly, I'll point out government laws influencing the crypto industry. Recently we've seen a number of restrictions placed on Bitcoin and altcoins due to the situation in Europe amid the Russia-Ukraine conflict. There have also been threats and regulation concerns from SEC and United States government as well as other States towards cryptocurrencies.

• Another factor to be considered is the sudden collapse in price of LUNA as the coin dropped form over $100,000 to currently $0.001. This dip has left many investors dumbfounded and frustrated and has also made many others afraid of holding positions so as not to experience same thing LUNA investors are going through. The large number of positions being closed by investors due to fear has also affected the crypto market.

• Bitcoin is still the largest and most successful cryptocurrency in the world and hence several other coins are attached to it somehow, hence whenever Bitcoin dips other Altcoins tend to follow, and same thing with whenever it surges. The current strong bearish in Bitcoin which has seen it trading as low as $29,000 has also influenced the general dip in the crypto market

• Another factor to highlight is the sentimental part. The dip in Bitcoin and LUNA especially has made many media outlets and social media crypto pages to start criticising cryptocurrencies and selling fear to many investors who in turn rush to take their assets off blockchain to avoid losing all their money. This negative media information are mostly used by newbies in the crypto space and several other investors that rely on media for guidance on their investments. This has also led to further dip in the crypto market.

How long will the Decline continue

The crypto market is unpredictable due to it's high volatility so in this case I don't know how long the bearish will continue or if it will continue at all but I believe we are already at the end of the bearish because this is the first time we are seeing Bitcoin hit so low a price since 2020. Major dips as such is bound to happen in the crypto market as there will always be Accumulation and Distribution phases, good traders know this is the best time to buy coins because the market is at historic low prices and this is when huge investors buy positions which will lead to prices surging again after which they'll start taking their profits till the uptrend weakens and another bearish begins. This is the cycle of price movement in the crypto market.

In summary I strongly believe the decline in prices is almost over and we are about to see strong bullish that will take Bitcoin back to $60,000 or more, and same with other coins including our beloved STEEM.

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 of crypto has to do with the amount of buying and selling activities in the market at a given period of time, so when there is a bullish trend there is increased buying of positions and vice versa when there's a bearish market.

The recent drop in prices of cryptocurrencies didn't cause a significant decrease in their trading volume especially in Bitcoin because most traders are exchanging their Bitcoin/altcoins for stable coins like USDT to retain the value of their investments hence we definitely have more sellers in the market but that also keeps the trading volume from dropping.
Trading volume can only decrease when there is less on chain buying and selling of the coins.

Moreover when there is a massive drop in prices as such, many investors start buying positions in anticipation of a trend reversal that will lead to a bullish trend. So these trading activities is what maintains the trading volume of the crypto market even in a huge bearish.

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From the screenshot above we can see that Bitcoin is currently having a 24hr trading volume of around $19B, this shows there is a decrease in trading volume but it is not equivalent to massive fall of prices. Some days back during the bearish trading volume increased by 10% but now its decreased showing that many investors are now trying to hold their positions as many also believe the bearish is coming to an end soon.

How will they deal with this market instability

Indeed the market is very unstable and volatile at this point and we can observe the gradual decrease in trading volume of Bitcoin and several other coins showing the confusion of traders as to what action to be taken at this point that will be profitable at the long run.

However, I think the best option now is to buy more positions. This is not the first time the crypto market is recording a huge decline, it has always resurged after some time and I don't think this will be any different. Prices are record low so it's time to invest to strong projects, when this dip is over you'll be smiling at your crypto accounts and taking profits.
But is is also important to DYOR because some projects may not rise even after the general bearish, especially projects without a good roadmap and community backing it up

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?

LUNA cryptocurrency was a successful project rated among the first 10 coins on coinmarketcap with Market capitalization of over $28B and market dominance of around 1.6% until recently. Terra also has several crypto projects and smart contracts running on its blockchain and a strong community of users especially in South Korea and Asia.

LUNA is a native coin of Terra blockchain which focuses on stable coins to help manage the constant rise and fall in crypto markets. TerraUSD (UST) is pegged to a dollar, same with TerraKRT which is pegged to South Korean Won. These Terra stablecoins help retain the value of assets just like fiat.

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The issues with Terra started when it's peg to dollar failed and this is largely because of the surge in interest rate of Federal Reserve. The fall of UST made the blockchain to issue more coins trying to meet up with its dollar peg but that also made LUNA to continue losing value in the crypto market. Another factor was the rift between Terra management and SEC in USA as there were questions over the UST to USD peg and this led to several lawsuits against the management. Another blow to Terra was its delistment from popular exchanges like Binance and Bybit coupled with the general drop in the crypto market. These all led TO LUNA falling from $100 to $0.0001 which is the worst dump ever witnessed in the crypto space.

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On the charts LUNA drop is so sudden and strong that it has left many investors in trauma as no one thought it will be this serious. Infact when it first fell to $50 some traders bought positions hoping it would rise but it failed totally

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Will it bounce back

I honestly don't think LUNA will ever bounce back to what it used to be, lots of funds have been lost in this price crisis and Terra will definitely not be able to regain the trust of many investors that lost in this dip. Moreover, Terra management still have lawsuits to tackle from SEC and lot of funds will be required stablize prices in the blockchain and make it surge again.
It will take a miracle to see Terra (Luna) back to its feet again

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

Steem has obviously been affected by the market decline as expected and this has its side effects which includes low value of payouts and low value of steem tokens.

However, I'm not stressed by this fall in price of STEEM. Steem is the main cryptocurrency I'm currently holding, infact I learnt about crypto through Steemit Crypto Academy and at least 60% of my entire crypto assets are in Steem. But I'm not stressed because I was actually hoping the price of STEEM dips so I can buy more and increase my SP.

I'm very confident in Steem because of Steemit platform where we can write, curate and earn. Steemit has a strong community and lot of users which is growing in number daily so it's almost impossible for such a platform to fail completely like Terra.
Moreover, decentralized social media is a concept that is gathering support daily as more people seem to be tired of the censorship and lack of freedom of expression surging in our traditional social media platforms and are now turning to decentralized media which gives them all those benefits. There are also several writers and bloggers who appreciate the post, curate and earn method used in Steemit.

Steem will be fine and record far higher prices in the nearest future as steemit records more participation and growth.

Conclusion

Volatility and constant price movement have always been trademarks of the crypto market and many traders have learnt how to work with the trend changes to make profits however the current bearish market is totally out of usual and have made many investors to pull out of their positions for fear of losing value of the assets while some have pulled our of the crypto market completely.

The crash of prices in Terra ecosystem has also affected the crypto market as many traders now hold their positions with fear.

However, I believe this is the best time to accumulate more coins, assets like Bitcoin and strong altcoins should be bought now because this dip won't last much longer. As for steemians like myself, I'll recommend buying more steem now that prices are low and power up.