Steemit Crypto Academy Contest / S1W4 – Reviewing the Instability of the Crypto Market by @steemdoctor1

Hello everybody.

Welcome to this post. I hope that all of you will be happy and enjoying your good health with the grace and blessings of Almighty Allah. Today, I am here to present my participation post in the Steemit Engagement Contest Week 4. This post is actually in the SteemitCryptoAcademy and the topic of discussion for today is Reviewing the Instability of the Crypto Market. So, let's start the discussion without any waste of time.

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Huge Drop in The Crypto Market

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Every crypto trader and every person which is linked with the digital world is well-aware of the huge drop in the cryptocurrency market. The market of cryptocurrency is actually of high volatile nature and drips or dumps are the usual matters of the crypto markets.

We have seen a very huge loss of the value of many popular cryptocurrency assets including the King of cryptocurrency, Bitcoin. After 2020, we have the first time seen the Bitcoin trading below $25k. It is really a huge loss to the Bitcoin market. Have a look at the below image.

_{Drop of BTC Price to $24.5K}

In the above image, we have seen the market of Bitcoin is experiencing a continuous downtrend as we know that all the altcoins move according to the Bitcoin, so we have also seen a huge loss of the whole crypto market, especially altcoins including LUNA and TerraUSD.

We have seen a bit of improvement in the crypto market in the past 2 days but still, the drop is too huge that it will take several months to recover. Drops/Dips and Pumps are the common parts of the crypto markets so we do not be so much curious about that. During the last week, the overall market cap of cryptocurrency has decreased from 3 trillion dollars to about half. That's why this dump is a major matter of discussion these days everywhere.

Reasons Behind this Dump

There are some solid reasons behind the dump of the cryptocurrency market these days. Some major reasons according to my understanding and knowledge are given below.

• As we all know that all of the altcoins are linked to the value of Bitcoin. So, due to the dump of Bitcoin price, the value of the overall crypto market is lowered. This is a major factor behind the current dump.

• Another reason could be the crash of Terra coins, LUNA, and the TerraUSD. The unpegging of UST from the dollar is a major reason for creating a curious situation among crypto investors. So, many of the investors have left the market that causing a huge dump.

• The price of cryptocurrencies follows the downtrend when the number of sellers exceeds the number of buyers in the market. Due to the unpegging of the stable coins, many sellers came into view and this activity contribute to this huge dump of the market.

• Another major reason behind this huge dump could be the action of the United State Federal Reserve against inflation. As inflation was increasing to a great extent, the U.S Federal Reserve took the action against it.

How Far this Dump Could be Continue?

As we have discussed earlier that the dumps and jumps are the usual cases of the crypto market. But this drop is a huge drop in the history of the cryptocurrency so far. We have not seen such a huge dump after 2020. But we can hope for a betterment very soon as we have seen that investors are again entering the market.

Actually, when the Bitcoin was dumped below $35K, many of the new traders (investors) became worried and caught up in the bad news about the cryptocurrency, due to which the market dropped further and the breakage of the stop loss levels of different traders cause this huge dump in the market.

But now the investors are again joining the market as the prices are too low. The market whales that cause the dump are now rejoining the market in order to make a huge profit when the market goes upward. So, we can hope for a very soon recovery of this dump. As the dump is too much huge so it could take 2 to 3 months to recover.

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Relation between Trading Volume and this Drop

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As I have told you earlier that this drop is a very huge drop in the cryptocurrency market so far. But it is very interesting to know that the trading volume of the coins is not affected too much due to this drop. The decrease in trading volume is also a major reason behind the decrease in the price of the assets but we have noticed that the trading volume of the assets is not decreased during this dump. This thing shows that the investors are strictly satisfied with their investment and have held their assets in the seek of a better opportunity to get profit.

We can consider it with an example that the volume of Bitcoin is $32B which is not too much affected by the decrease in the price of Bitcoin. The volume of the Bitcoin is negligibly affected by this dump. So, Volume is not a valid reason behind this dump so the action of the U.S Federal Reserve against inflation can be considered a major reason behind this huge dump.

I would like to say in this situation that a huge pump in the market of Bitcoin is coming very soon. I can support this statement with the fact that if the volume of a market is not affected by the decrease in the price, it is a strong signal of the upcoming huge pump in the price. We have also seen this situation in the July of the last year, BTC pumped up above $60K from $30K so we can expect this situation again now.

How will they deal with this market instability?

As we know that ups and downs are the usual matters of the crypto market so this dump is not the first time. Many times, we have seen dumps in the market cryptocurrency in the past. But we have also seen that these dumps recovered very soon. We can overcome this critical situation in the market with patience and hope instead of being panic and worrying.

Actually, I think that this is the best time to invest in cryptocurrencies as the values of all the coins had been dropped several times below the average prices. We should have to purchase good coins at this time and hold them for a long time in order to get a huge profit. Bitcoin can recover from this dump by stabilizing itself to a point and then adopting a particular upward direction to cover the loss. In this way, we can deal with the instability of the market.

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Relation between the Instability of market and the LUNA coin

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One of the most important coins in the crypto space is the LUNA coin which belongs to a very impressive blockchain known as Terra blockchain. LUNA coin has been affected very badly by this instability of the market but actually, I would like to say that the crash of Terra coins (LUNA and UST) is a major reason behind the current market instability. The stable coin of the Terra blockchain, TerraUSD has lost its peg with the U.S dollar and this is the major reason behind the current instability of the market as the investors became worried about the stable coins and thus started withdrawing their invested amount.

The LUNA coin and the UST (TerraUSD) are maintained in an algorithmic manner such that their prices may affect each other. On May 6th, when the Bitcoin dump started, we saw a huge decline in the prices of the LUNA token. Firstly, it dropped from $103 to $86 and then $45, after that, $15, but this decline did not find a stop and continued till $0.00001. This is the largest of any coin in the history of cryptocurrency. The LUNA coin had experienced more than 100% loss in the past few days. Have a look at the below image to see the huge downtrend of the LUNA token.

_{Decline in LUNA price}

Similarly, the stable coin of the Terra ecosystem, TerraUSD which is generally supposed to be pegged to the U.S dollar, lost its peg and now it is trading just below $0.10. This is really a huge loss in the history of any stable coin. Due to this decline in the price of UST, many traders became worried and left the market resulting in a huge market dump. Have a look at the below image in this regard.

_{Decline in the price of TerraUSD}

There are several reasons behind this huge instability in the Terra ecosystem coins. One of the reasons is that the large investors left the UST market and simultaneously opened short trades in the LUNA market which resulted in this huge crash. Moreover, the Terra company has sold a huge number of Bitcoins from their reserves that causing the huge instability in the market, overall.

Recovery of LUNA and TerraUSD

Actually, the decline in the prices of the LUNA coin and the stable coin, UST is the largest loss in the history of the cryptocurrency. But the Terra ecosystem is strong enough to overcome this loss very soon. The owner of the Terra company must have to take some profitable steps in order to improve the market of UST and LUNA.

Firstly, the team should have to consider the matter of pegging the TerraUSD back to the U.S dollar. If there will be stability in the UST price, it will surely improve the market of LUNA tokens. Moreover, the team should have managed the burning of the LUNA token so that they could pump the price of LUNA. You can read more about this matter in this post : Instability of Terra ecosystem.

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Market Instability and the Steem Ecosystem

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The Steem ecosystem is actually my favorite blockchain ecosystem and as the market is in an unstable condition, so the STEEM coin is also affected by this huge drop in the market of cryptocurrency. The STEEM token dropped its value from $0.45 to $0.24. This is a huge dump in the price of STEEM tokens. The payouts of the posts are badly affected by the market drop. Recently, I got a vote from SC01 of $32 but at the time of payout is reduced to nearly half, only $19. Hehe, this is really critical situation but I hope for a betterment very soon.

But I am not stressed at all by the condition of the STEEM token now as I know that the Steem ecosystem is a very strong ecosystem that can never touch the ground. The price of STEEM had been dropped many times in the past but it recovered itself at the same rate. This thing really impresses me a lot.

In my view, the future of the Steem blockchain is very bright and the STEEM coin will be at its peak. As soon as the market recovers, the STEEM token will also recover very soon. Now, the price of STEEM is very low so it is the best time to invest in the Steem ecosystem. I think it is the very best time to increase your Steem Power (SP). We should manage to increase our SP during this dump as much as we can. I would like to aware my Steemit fellows that,

Let's Increase our Power-Ups!

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Conclusions

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The market of cryptocurrencies is so volatile that the dips and dumps are the usual terms related to it. There are several reasons behind the recent decline in the price of cryptocurrencies including the high number of sellers as compared to the buyers, the decrease in the price of Bitcoin, and the action of the U.S Federal Reserves against the inflation rate.

We can hope that the dump of the cryptocurrency market will recover very soon. It is the best time to invest in the good coins or tokens and then hold then for a long time in order to secure a good profit. As soon as the investors join the market, the dump will be recover very soon.

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I would like to invite my friends @malikusman1, @msquaretwins, @msquaretk, @abdu.navi03 to take part in this impressive contest.

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Participant: @steemdoctor1

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