Steemit Crypto Academy Contest / S1W4 - Reviewing the Instability of the Crypto Market by @simonnwigwe
Hi guys,
Welcome once again to my blog. Today I want to participate in the ongoing contest organised by the steemit crypto academy through the engagement challenge that was organised by the steemit team.
Welcome once again to my blog. Today I want to participate in the ongoing contest organised by the steemit crypto academy through the engagement challenge that was organised by the steemit team.
This week the topic we are to write on is titled Reviewing the Instability of the Crypto Market. This is a wonderful topic because it is associated with the present happenings in the crypto ecosystem. So before we go into the questions that are needed to be answered, let's first and foremost understand the concept of the topic under review.
When we talk about the instability in the crypto market we are referring to the continuous fluctuations of the price of crypto assets. This topic is going to help us understand the instability and its causes. Let's ride on as we try to give answers to the asked questions.
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?
The present situation of the crypto market is not surprising because the crypto market from day one is never stable. Though, we are seeing a very sharp decline which ideal is something to worry about. A lot of people have lost a huge sum of money because of this sharp decline in the price of an asset.
The Crypto market is not something we should rely on. The reason I said this is because this can cause you emotional and psychological trauma which may cause you to commit suicide. It has been happening, it is not a new story at all. It is on this note that crypto experts will always tell traders to invest what they can afford to lose. What this means is that your crypto investment shouldn't be all you have in the world because the market can sometimes be very funny.
What do you think of this drop?
I think that a strong factor which was not kept under check has caused the drop in the price of crypto assets. We know that price only drops if the supply of the asset exceeds its demand. So the supply of crypto assets was kept unchecked and that lead to the drop we recently saw and are still seeing in the crypto market. Supply in the crypto asset refers to the selling off of held assets by traders. Whereas the demand refers to the buying and holding of this asset thereby increasing the worth and price of the asset.
This dropping is a result of the selling off of owned crypto assets, this did not just start or traders did not just decide to start selling them off, it was promoted by some rules and regulations that the traders of the asset are not happy with. The Securities and Exchange Commission (SEC) are part of those who gives certain rules and regulations in the crypto market that cause traders to start selling off their assets. The selling off of this asset as I have explained earlier in the supply of the asset led to supply greater than demand.
State its causes and how long do you think it will continue in this downtrend?
The cause of this drop in the crypto asset can be seen in two different dimensions I.e the supply exceeding demand and also the news or rules and regulations made by different bodies in our various countries regarding crypto-assets an example is the imposing of tax fees on crypto traders.
So when these rules and regulations are made and the traders are not comfortable with them, the tendency to withdraw their entire asset and then invest in something else may earn them better. The case of India is a peculiar one, we can see that most steemians in India are no longer with us because of the high levy of the task imposed on them. This causes the selling off of assets.
If the traders start selling off their assets as in the case of traders in India, you will discover supply exceeding demand and that may lead to the downtrend of the asset movement as we currently are seeing in our today's market. We can as well attribute this drop to the fact that a lot of news is circulating on the air and fear enters the heart of traders in other to be on the safer side they tend to sell off their assets.
Another way we can analyse this cause is using the technical analysis method where we will be considering bitcoin as a case study. We know that bitcoin controls the market of crypto that is like the price of bitcoin is increasing, all other crypto is also increasing and as the price of bitcoin is decreasing, all other prices of crypto are decreasing.
The price of Bitcoin broke the last support and could not move upwards again in the previous week due to too much selling of the asset. That has also dragged other assets alongside too. Based on the fear within traders, they sold most of this asset and that pulled down the price significantly.
How long do you think it will continue in this downtrend?
The downtrend movement will continue for a while because a lot of sales have already been down in the crypto market. As I said earlier unless the demand for the asset exceeds the supply of the asset, the movement will continue in a downward or downtrend direction. So for now, it is only when many investors put a lot of money into the asset again before the downtrend will stop.
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?
The drop in the price of crypto assets did not affect the trading volume of most crypto assets e.g Bitcoin. It is indeed a thing of concern but before we answer that question let's first understand what trading volume is all about.
Trading volume simply means the flow of money in and out of exchange based on certain currencies. The buying and selling of Bitcoin refer to the money coming in and going out from the bitcoin which is the trading volume of the bitcoin. Traders buy and sell assets. As traders are selling their assets, other traders are busy buying the asset and that is the reason why the trading volume of most assets is not affected by the currentt instability of the crypto market.
If buyers and sellers of a particular asset are always available, then we conclude that the trading volume is not affected because anytime money is going out, I.e traders are selling off their assets, money is also coming in as a result of traders buying assets.
How will they deal with this market instability?
Market instability will always continue until there is an equilibrium between traders that is the buyers and the sellers of assets. The demand and the supply of assets have to be equal for the instability of the crypto market to be solved. Take for example the demand of 1k assets is needed, and the supply of 1k assets is also required to balance the entire equation. This is the only way the crypto instability can be solved.
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 downfall of the Terra ecosystem is seen as a result of the current instability in the crypto market. We saw how this sharp drop brought the price of luna to less than $0.5. Before this incident, the luna ecosystem had issues with their stable coin which is the UST. Because of these issues, the UST which was initially pegged to US dollars is seen below the US dollars. The rules and regulations that are now coming into the crypto ecosystem also affected the luna ecosystem. According to the Securities and Exchange Commission (SEC), the laid down guide that will guarantee the equality of the UST and US dollars is no longer there and for that reason, the UST shouldn't be legged to US dollars. This is where the problem of the luna ecosystem started.
The issues circulated and that came to the notice of lots of the investors who were not happy with the latest development and thereby lost hope in the project. Instead of losing their entire asset, they began to remove their share from the ecosystem and that is the reason why the drop in the price of the asset affected the Terra ecosystem more than any other ecosystem.
Will its price bounce back
The price of luna as well as the UST may take a longer period to bounce back. To me, it is nearly impossible for the price to come back because this drop has left doubt in the hearts of traders and every trader at this point is afraid of the luna project. Nobody will want to lose much money again. It will only come back if investors pump a lot of money into the ecosystem again.
The interview was carried out with the owner of the ecosystem in the person of Do Kwon where he boldly assured users that the project will bounce back. I don't know how he intends to achieve it but all I know is that it will require lots of investment for the project to return and it can never be normal like previous.
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
Every crypto trader was shaken by the downtrend movement of the price of assets in the past few weeks. As a steemian, I was not left out because I watched the value of my wallet drop down to about $3000. This was something that was initially reading $6000. I should be worried because even my reward was completely slashed by almost half.
I also notice a disturbing scenario during my payout where the SBD disappeared and I was only paid in steem and steem power. The entire thing made me think if the steem blockchain is also about the experience that the Terra blockchain just experienced. I had to ask questions and also read articles about the steem blockchain regarding the scenario.
I read different posts and I also went as far as reading the steemit white paper where the happening of reward distribution was written. I discovered that what we were experiencing is the debt ratio. This is a situation where the printing of the SDB will be placed on hold because the ratio exceeded 9%. These reward distributions ought to be in steem and steem power until the ratio returns to 9%. This is done to keep the value of the SBD intact.
After reading through the steemit white paper, my trust for the project was rekindled and then I began discussing it with some of my friend who was very scared and had even gone as far as starting a power down on their account. The project experience this type of scenario when there is a bearish or downtrend that broke a lot of support and has refused to go up again causing the price of the asset to go down.
Conclusion
Instability in the crypto ecosystem is something we can not do without. We have also seen from the very first beginning that the crypto markets are volatile and for that reason, one has to be careful while dealing with them. Do not invest what you can not afford to lose, this is always the advice given to crypto traders. There are times when you will earn profit and there are also times when you have to lose as well.
There were too many reasons for this sudden drop of cryptocurrencies moreover of fear. Other factors are crucial to recover again the reputation of this project that was very demanded between the big investors.
Assalamoalaikum
Brother you make an excellent Analysis of the Crypto Market downfall and i think your article is supported by number of Arguments which are 100% accurate.
Your fundamental and Technical analysis told how much your mind hold crypto knowledge.
Keep it up bro you're doing amazing
Thanks
#contest