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

Hi this is Amina Safdar writing from Pakistan. I'm gonna share my review on crypto market instability. Without wasting time let's jump into that.

Question 1:Instability of crypto, causes, how long will this downfall continue?

Cryptocurrency is the most volatile currency happened to be in the world right now due to the fact that it is so uncertain. Why is that so? People call it digital gold, then why its price is falling while gold is over the moon?

Because people believe in the things that can hold in their hands and see with their eyes, while cryptocurrency is just a digit for some people out their, that makes them indulge in panic selling.

Causes of crypto market crash

• 1.Global inflation and federal reserve interest

Yes the global inflation as a post pandemic effects is causing the markets to crash whether it is crypto or stock market. The reason behind it is this thing" when there is quantitative easing(unlimited supply of money) inflation reduces and people have enough assets to meet their needs (without selling their assets). This decline in inflation is crypto friendly(makes their price to rock), that's why in covid-19 crypto was booming.

But when there is quantitative tightening(limited money supply) inflation increases, because supply of money is limited but demand is high, price of everything increases, that makes crypto and stock market value to crash. Because people sell their assets in the time of crisis.

• 2.Ukraine-Russia War

Both of them count for 30% of total export around the world (including natural gas, oil and wheat). Tension in their region and Europe's sanctions on Russia resulted in poverty and inflation of

commodities. That's effecting economy worldwide. Infact world bank's growth has declined from 4.1% to 3.2% since 2022, according to IMF

• 3.China's Govt made crypto illegal

Govt of China and many other countries are not in favour of cryptocurrency, last year they also applied regulations. Which resulted in decline of crypto value. Again they made mining, trading and transactions illegal in their country's bank, reported from Sichuan province. This kinda negative actions cracks the confidence of people in crypto and they pull out their assets to invest in the non-virtual world.

• 4:Elon Musk's Remarks about Bitcoin

After purchasing Bitcoin shares worth 1.5b$, he turned around about allowing Bitcoin as a payment for his tesla products. Saying that mining of Bitcoin consumes too much fuel and releases coal that is not environment friendly. This kinda remarks can shake the infrastructure even when he was just in his remarks.

• 5.Terra-Luna crash

Terra is a stable coin of worth one dollar always, whose price is kept stable by its guardian and sister currency luna (which is not stable). Their price fell to 0.11$ from 116$, resulting 20b$ worth industry into 0$ on binance in a matter of few hours.

This kinda death is a nightmare for all the investors who invest all of their money in crypto. Definitely this must be the scenario that made investors to bring back their other crypto(assuming they could be the next). And that's how all market crashed, where there is high supply(more selling) but low demand assets become worthless.

How long will this downfall continue?

When the supply will become limited then can the value of crypto rise. The crash was so abrupt that it'll take extra time now. Also if trading can stop for sometime, selling pressure can be reversed.

Question 2. Why Bitcoin trading still continues? how they'll deal with this instability?

The price of Bitcoin was double the price it has now for each coin in November 2021 (51.000$ to 23,143$). Analysts say it could fall to 20,000$ and remains there for sometime before it rise again. It has fell upto 22% this year.
said Edward Mayo aged market analyst at Oanda.

Besides all this financial loss, why trading is still continue. I'm no one to talk about this but just a general review of the scenario happened after terra-Luna collapse.

After terra fell to few scents, its luna sister wasn't able to bring back its price to one dollar. Because Do Kwon (terra-Luna owner) had sold reserves worth 1b$ luna (which reduced its price due to high supply) this year and bought bitcoin to guard the price of terra. Then sold 1.3b$ Bitcoin to stabilize terra and again purchased 850m$ Bitcoin.

This buying and selling could cause more drag said Corey Miller to TechCrunch.
But binance stopped trading for a while after this market crash

How to deal with this instability

Volatility and instability is the nature of cryptocurrency and is not going to disappear any soon. Instead you should be mindful enough to figure out how much to invest (Amount that you can lose without any panic).

Market is in wait and see mode said Edward mayo senior market analyst at Oanda, told CBS News.

Experts say that btc will hit 100,000$ in future, because there is an old saying

White heat tempers finest metals

Things that can help to deal

• limited Trade can help
• limited supply can increase its price
• problem is in the federal govt(reserve ) who increased interest rates, if that decreases Bitcoin can stabilize
• ETF(Exchange traded funds) launch in United states for crypto can stabilize, broaden and reduce risks in the market.

Question 3. Relation between crypto market instability and terra-luna crash? Will terra-luna price rise in future?If yes then how and when.

For understanding the relation between these two, you should first know how terra-Luna ecosystem works. Terra is a stable coin (not backed by cash as theter) whose value is thought to be constant on 1$, if fluctuations occur in the form of higher or lower price than 1$, its price is guarded by Luna (which is also worth 1$).

So these two are exchangeable, if terra falls, luna is encouraged to drain to keep terra at 1$, if luna falls, terra is supposed to do so.

That's why it is called an ecosystem where they work with mutual interaction.
But it failed. Luna collapsed and terra became 0.14$ last week on Friday.

Owner and investors began to sell their Bitcoin reserves to maintain terra at 1$, that aroused panic and fear in the market.

More people began selling btc after its price crasded, supply ratio increased than demand. There was a consequence in the form of a loss of multi-million dollar industry from $41bn to $6.6m in just few days.

This was the relation between market instability and terra-Luna collapse that whole market panicked and crashed.
Even such a fall in btc was never seen for two years.

Will Terra-Luna revive?

• There seems no light right now about its revival becuase it has lost the confidence of the investors. Changpeng Zhao, CEO of crypto exchange Binance lost his crypto assets worth 1.6 billion$ to 3000$ dollars only

• Hitesh Malviya, who established ICBcapital with its blockchain, said that supply of Terra is massive and burning its 65% of Terra to reach 1$ again won't do any good now

• We as steemians know it's not so easy to bounce back, we've been seeing low price of steem since 2022.

Question 4. Has this market downturn caused you as a steemit user some stress? Or are you still confident in this project?

• Yes it stresses me out seeing that we people(including me lol) work so hard to generate quality content, which goes ignored sometimes. In addition to that if you get votes the price is so low that you dare not consider to cash them out. Yes it stresses out if you have only one income source that is steemit.

• But sometimes i get the confidence that it's a good time to invest on steemit, its price can reach to dollars sometime in future. Who know? Even there is a prediction about it which goes easy on nerves about steem price in future.

SOURCE

• Predicted price about steem is 0.54$ in 2022, 0.60$ in 2023 and 0.70 in 2025

That's all from my side guys. Hope you're gonna like it.

Thanksgiving

@crypto-academy