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

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?

What do you think of this drop?

Well, joining the cryptocurrency world is not for the soft-hearted. When investing in crypto, you have two things in mind. Either you go for the long term or you are for short term trading. Long-term strategy means you are ready to hold and expect price swings from either of the directions and at any time. So big dips like the current situation in the past days in the market will not worry a long-term investor. Trading experts will advise traders not to check the market during volatile market dips.

Then again, this is not the first time the crypto market is going through this period. In 2017, there was a similar situation which some experts refer to as a crypto crash. During that period, major cryptocurrencies lose value. So the current situation just confirms how cryptocurrencies are volatile and can go down 90%. So volatility will always surface in the market, so we have to be ready to deal with it.

I know this situation is going to hurt a lot of investors, and that is the reason why it is cool to invest with what you are ultimately okay losing. To avoid going through a stressful moment like this, apply the long-term strategy. Set it and forget, don't let your emotions get over your sense of thinking. Dips are always the right time to make the wrong decision, so don't change your strategy too quickly or act rashly. As I mentioned, dips will always surface in the market. That is my take on the current situation.

State its causes and how long do you think it will continue in this downtrend?

As I mentioned, such moments are expected and are mostly caused by a combination of factors. You can think of the excitement about the drop of coins, negative remarks from influential investors, a government crackdown, functional failure of the blockchain, etc.

As for the situation in the past few days, Bitcoin has dropped about 9% from last month. We have the push by the US Bureau of Labor on consumer prices that were higher than expected in April. This spiked crypto investors to sell off risky assets like crypto and bitcoin, which is the giant and was not left behind. With the dominance of bitcoin, the market was under pressure. The fact that bitcoin dropped below $30000 on Monday. It had to generate fear in the market and push more investors to sell to get out of the market. The year 2022 has not been easy for Bitcoin, with all the early predictions of hitting 100k. The coin has found it difficult to hit 60k making investors scared of keeping holding the asset.

Another cause was the breakdown in the Terra ecosystem, in which at one point TerraUSD lost its $1 peg to the dollar. The news of the stable coin trading above $0.6 and below $1 spiked more fear in the crypto market last week. Not only a crazy drop in the stable coin, but the Luna coin also dropped from about $95 to $0.0003 in a matter of weeks. With this kind of news, most traders will not want to stay in the market.

The market faces the Nasdaq drop too, which also influenced the decision of some traders. For me, the recent drop situation was greatly influenced by the fall of bitcoin below 30k and the stable coin TerraUSD.

Well for me, it is not the first time it has happened. That is how I will look at it, so if it happens then and resurrected. Then it is bound to happen, saying if it will continue. That I can't confirm, because many are still scared and will put out negative information to the public. Cryptocurrencies are volatile, so real investors know dips and drops will always show up. So sticking to your strategy is the key.

I will end by saying, it will end. Most of the time investors jump out of the market because of a lack of information. After getting the right information and reasons for the spikes, many will jump back to the market. The situation will look like a reset, and we are good to continue. So we are not going to continue in a downtrend, crypto markets work in both directions. So expect the opposite trend, it might not be equivalent to the percentage downtrend.

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?

If the trading volume is not affected, then I will want to say it is an added advantage to the investors holding that asset. Volume is the number of shares in the market to be sold or bought. When the price is falling and volume is resistant, it can be seen as an indicator of a bullish signal. So during the drop, the investor is confident in the asset and sticking to their strategy and target point. It also shows that there are available shares that the investor is not willing to sell at the price drop. Then again strategy, most of these coins investors are in for the long haul. So a price drop is no problem for them but an excellent opportunity to buy and hold.

How will they deal with this market instability?

Crypto markets are generally unstable because of the volatile feature, so it's not something to avoid but accept to deal with. On the other hand, a long-term strategy. Get into the market and forget, do as much to avoid checking your portfolio. No matter the direction of the market, you are more comfortable while waiting on your target.

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 Terra ecosystem has played a big role in the current instability in the past few days. It dropped in the stable coin TerraUSD, which is supposed to peg at $1 to below $1 is a problem. A big problem. TerraUSD is one of the recent popular stable coins in the market. In a normal situation, a stable coin is to offer better safety in assets with its stable valuation. So dropping down about 30% generated fear in the minds of investors, making investors question the validity of a stable coin algorithm. We know cryptocurrencies are volatile, but stable coins are expected to peg at $1, so moving from the position calls for concern. I know you want to look at the SBD, which is the stable coin on the Steem blockchain. Yeah, it's above the $1 peg, but investors want to pick profit and not lose. So moving below $1 will push investors in other assets to pull out of the market.

The LUNA coins which is a native coin on the Terra ecosystem had a drop of over 90%. Due to the high number of investors, this situation was a great disruption to the crypto market last week.

Do you think its price will bounce back? If so, tell us how and when?

Bounce back, I will say if everything works well with the current updates from the LUNA Foundation Guard. They hope that they might be able to push in some reserves to help peg the TearraUSD. As for the sister coin (Luna), bouncing back will not be that easy. Note before this Lab breakdown, some experts had predicted. Such happening will scare many from investing in the Luna or any of the coins associated with the ecosystem. So I can categorically say, it will not be any time soon when compared to the percentage drop of last week.

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

Hahahahaha, I know we will get to this point. The truth be told, I did not bounder myself. Like I said, volatility is a factor you can't avoid in crypto. So what I did was, not check what was happening. Again you want to ask but what about your post payout. Yeah, no man indeed wants a low payout on a post. I joined the steemit platform two years ago, and the price of steem was not that too different from what we have now. So for the steem currency dropping to $0.2, it did not stress me at all. Given that the currency has moved from that price to about $1.2, there will be a comeback. I will only rethink if we are having a situation like the luna coin(down 90%), that is a call for concern.

Im 100% confident in the project, Note I did mention that as price drops and volume is unaffected is a bullish signal. The current powerup project back by the club status concept helps the user not to power down and jump out. let's wait for the days ahead, the steem currency might hit 0.5, then we continue from there.

Note, that my publication is not a trading strategy to use. It is all my opinion, so before making use of my work. I will call on you to do your research.

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Cheers
Thanks for dropping by
@fombae