Edited with Imarkup

Good day everyone in the Steemit Crypto Academy. I'm quite excited to be participating in this week's Engagement Challenge in this particular community, especially considering the instrumentality of the topic that is to be discussed this week.

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?

There really isn't enough adjective to describe the unprecedented tanking of the crypto market as is being experienced at the moment. Most of the cryptocurrency markets have been heartbreakingly ravaged. The crypto-currency market had reached an all-time high last November. However, from that time the prices began to stumble and has assumed an even more shocking dimension in the last week. This makes people begin to ask serious questions on how stable cryptocurrencies could really be. The worst aspect of it is that so-called cryptocurrency stablecoins have not even been left out of this volatility leaving investors perplexed.

Tracing the market from when it had reached its all time high in 2021 you will discover that it has lost more than 59% from that time with the last week being the most disturbing. There has been a wide-spread sell-off. In this past week the Bitcoin has traded even as low as $27,000. Ethereum is the second largest cryptocurrency when considered in terms of market capitalization. It has not also been spared and has gone down by more than 30%. Other altcoins like DOT and SOL have witnessed an increasing downturn of more than 40%. Dogecoin which is a meme token that has enjoyed the media influence of Elon Musk has equally gone down by up to 35%.

The entire scenario above has begun to raise serious fears and concern in the hearts and minds of cryptocurrency investors. What I really think is that so many people are beginning to lose interest in cryptocurrency. Some have begun to move to other markets that are perceived to be more stable such as forex, stocks, commodities and other financial markets. Nevertheless, this is actually with the exception of such countries like El Salvador that keep increasing their stake in the bitcoin token as the market continues to tank. I personally think that this downtrend is disturbing and, except for people who would be happily shorting the cryptocurrency market, a lot of other investors are beginning to lose interest.

I carried out some research online and came across a particular article on money.usnews.com which explains 6 reasons why the authors Michael Adams and John Divine believe the crypto market is going down. Some of the causes of the ongoing downtrend of the crypto-currency market can include:-

• It has been observed by CryptoQuant that crypto investors are beginning to use quite huge amounts of leverage amounting to so much risk which is a strategy often adopted by people who are mining a particular coin to prevent the price of such coin dropping remarkable in the future

• The lack of liquidity in cryptocurrency markets when compared to other stronger traditional financial markets means that large sell-offs would often create excessive supply in the face of limited demand of assets leading to downwards push of prices

• Cryptocurrency mining has been banned by countries such as China as of June 2021 and this led to a huge decrease in the hash rate. Decrease in network hashrate leads to decrease in prices of a coin.

• The influence of important crypto investors equally increases the volatility experienced with cryptocurrencies and this can work either way

As to how long I think this down trend would continue, I do not really see an end to it in the near future. However, I believe that a few variables can contribute to the price increasing from where it is now. One of such is that if government regulatory agencies on cryptocurrency should become more favorable it would potentially lead to higher adoption and confidence in the crypto market and this has the ability of pushing prices upwards. Equally, if more countries, especially the ones with stable and sustainable electricity supply, should permit crypto mining it would probably lead to an increase of the hash rate and this can also increase prices of crypto coins.

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?

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Relationship between volume and price is that if prices are increasing and volume is equally increasing it means that there is much pressure and momentum in the market. Potentially this can continue to push prices further upwards. But if the price is increasing and the volume is reducing then there is a divergence which means that there isn't enough trading volume to support prices going further upwards. A downward reversal would be expected in that situation.

Conversely, if prices are dropping and volume remains stable or increasing then it means that there is aggressive sell-off. A lot of volume is coming into the market which will continue to push prices lower. So, the fact that the price of Bitcoin decreases without volume decreasing means that there is much sell-off going on in the market and this can potentially continue to push the price lower.

Dealing with this particular ugly trend actually has so much to do with creating an enabling environment in the crypto space that attracts people more into the system. This means that there is a need to drive for the adoption of cryptocurrencies and address some of the issues like government unfavorable regulatory policies in places like China in order to solve the underlying problems that led to the downfall in the first place. Much adoption means more buying pressure. It is only buyers that can support the market and push the price of Bitcoin upwards.

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?

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From the things I have gathered on the internet a few factors contributed to the downfall of the Terra ecosystem and its Luna currency. It is on record that on Saturday the 7th of May 2022 more than $2 billion worth of the TERA eco-system stablecoin, the Terra UST were removed from the Anchor Protocol staking initiative. At the same time it should also be noted that hundreds of millions of them were sold off immediately.

It is unclear for now whether this was a deliberate attack that is meant to affect the ecosystem in a malicious way or whether it was a mere reaction to the fact that the crypto space had suddenly become so volatile and possibly untrustworthy. This was a tremendous sell-off and was responsible for the price being driven to as low as 91 cents.

In order to benefit from arbitrage opportunities so many traders had tried to exchange quickly and see if they could obtain $1 Luna coin with 90 cents UST but it is sad to note that more than $100 million UST cannot be burned in a day as this is required before being exchanged for Luna coin.

The crux of the whole matter is that based on this research for which an article on cnet.com was instrumental to my conclusions is that the current instability in the crypto space is not quite correlated to the downfall of the Luna ecosystem. It is more reasonable to believe that what happened with Luna was a deliberate attempt by malicious elements who hoped to gain by buying so much UST and unstaking immediately in order to short the market to gain tremendous benefits.

As to whether the price of the Luna token can still bounce back, how and when all I know for now is that Do Kwon, the CEO of the Terraform Labs has actually mapped out a plan which he hopes to deploy as a way of resuscitating or reviving the Luna token. This plan involves a proposed initiative to fork the terra blockchain. However, some crypto influencers like Changpeng Zhao the founder of Binance have disagreed noting that the forking idea will not actually increase the value of the new fork.

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

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I have watched on with so much dismay and displeasure as the entire cryptocurrency space and of course the Steem token itself have continued to plunge further downwards. This has been quite disturbing and even discouraging for me personally when you consider the rewards I receive from the Steemit Crypto Academy or from other communities in the Steemit social media.

For me, this effective downturn is more pronounced in the stomach crypto Academy considering the fact that in the Academy so much research work, effort and commitment are required from you in order to produce a creditable assignment post in response to the weekly homeworks usually given out by the professors after their crypto related lectures.

What I have observed since the crypto space began to plunge downwards and so also the Steem token is that on average I now go back home with barely $6 after powering up half of my liquid earnings. Of course the powering up initiative is a welcome development since it is meant to reduce the excessive supply of the Steem token in the market as a way of pushing the price upwards.

However, I am discouraged by the fact that what I receive as the total liquid reward that is Plus the one powered up and the one I cash out is barely $12 and that is poor like I said earlier when compared to the level of research work I put into producing a particular homework post. This is even more disturbing when you consider that providing the same level of research work on platforms like Fiverr and Upwork could pay you up to $50 and $100.

Nevertheless, I do have strong hopes that the Steem token would still push up considerably higher even above its all-time high in the near future because the cryptocurrency space would eventually enjoy so much adoption. Even though there has been a tremendous downturn in the market it is still better when compared with the trading volumes which were even lower in 2019 and 2020 before the boom in 2021.

There are quite a number of reasons why I believe that the cryptocurrencies would still skyrocket in value. This general market price increase I am anticipating will equally work in favour of the Steem token. Some of the reasons why I believe the price of Steem will recover together with the crypto market itself include:-

• More institutions are beginning to announce the public trading of cryptocurrencies

• More sovereign nations have begun to adopt crypto currencies such as the Bitcoin as national currencies and this has the ability of pushing prices of cryptos upwards

• A lot of cryptocurrency miners have started moving away from unfavorable domains like China which used to have up to 50% mining capacity of the entire crypto market to nations where they are more accepted. This is a good development as it has the potential of increasing the network hash rate that can also increase prices of cryptocurrencies

For the Steem token itself there are quite a good number of reasons why I still believe that it would make a good investment either in the near future or in the long run. Some of these reasons include:-

• Steemit.com which is the major project on the steam ecosystem has witnessed a tremendous amount of traffic that is even more than what other cryptocurrencies sites are receiving. This means there is much adoption of the network.

• There is the possibility of a massive inflow of people in the Steem coin considering the fact that it is easy for anyone to participate in this system and these can drive massive adoption rate

• Also, you will discover that the total number of registered accounts is quite high amounting to over 370,000 original wallet addresses

• Equally, it has been observed that the combined daily transactions of the equipment call networks is not up to the number of transactions take place on the Steem network

All these and many more are the reasons why I believe there is no need to panic and that the Steem token will still go back to its previous peaks and even above in the future.

CONCLUSION

There are a number of reasons why the cryptocurrency market has been in a serious downturn since the last quarter of last year. One of the reasons is the increasing tightening of regulations from the government like the Chinese government's banning of mining activities in the region. However, for some coins like bitcoin it has been observed that even with a decrease in prices has not affected trading volumes which implies that there is the possibility of prices continuing to move lower.

The fall of the Terra ecosystem and its token does not particularly correlate with the current instability of the crypto market. It has more to do with the possibility of malicious attack than an ordinary event. The Steem token has quite great potential of recovering from the current downtrend especially in the near future when I still envisage that cryptos will receive more adoption but with closer government regulations, after all, even the stock market is down now not just cryptos.