Steemit Crypto Academy Contest / S1W4 – Reviewing the Instability of the Crypto Market by @jelilu67
What I think about the drop
Probably the most volatile among the other stocks (forex, indices, energy groups, etc).
In recent days, specifically from last year ending to date cryptocurrencies have suffered a strong downtrend movement. This happened after the long bullish run when BTC and many other altcoins like ETH, Solana, Matic Etc reached their highest peak.
Usually, uptrends or bullish runs of this sort are always followed by downtrends. Just like the Wychoffs theory, when the assets reached their highest peak, the market is said to be in the distribution phase. At this phase, the market is expected to run bearish since most of the holders sell their holdings to take profits. However, the downtrends are also anticipated to happen for some time and not to break through some key levels as well.
However, with this particular market, the market has broken some key levels which suggest that the market is currently influenced by other factors other than the usual market psychology. In my opinion, the Russia-Ukraine war has had some effect on the dip. Some crypto whales have sold a greater percentage of their holdings to fight the war which has increased the amount in circulation thereby increasing the supply of the asset.
This drop is a long-term drop that is meant to happen considering everything on the chart. Crypto experts always know such situations and take advantage of the dip leaving the inexperienced traders to continue panicking.
Causes of the dip and how long I think it would last
As I said earlier, the dip is caused by two major factors. First and foremost for the technical part, considering Wyckoff's method, the market always follows a cycle that happens in four phases. From the accumulation phase to the uptrend phase, to the distribution phase, and finally the downtrend phase.
Hence, the market is currently in the downtrend phase which calls for a bearish run like what’s currently happening in the market. This is a long-term bullish run which means that the price could break below the previous support level just like how the market broke above the previous resistance level during the previous bullish trend movement.
Moreover, another cause of the dip in the Russia-Ukraine war. Just like I explained earlier, some renowned crypto whales and some countries have sold their crypto holdings to help stop the war. As we are all aware, these whales hold a greater percentage of these assets and when they sell their holdings, it causes the price the drop since the number of supply increases above the demand.
In such cases, inexperienced traders begin to panic and start selling their holdings. However, I still think there could be some further dip before the final bullish rally. From my estimate, the bearish run could continue for a month or two before some consolidation before another bullish rather. Hence I still think it’s too early to buy the dip within this period.
Why the drop in price doesn’t affect trading volume
Trading volume is not necessarily affected by any sort of price change. Either being a drop in price or a price increase.
Usually, when there is a dip, investors tend to add more volume as others are taking theirs out to balance the trading volume. However, the trading volume of most of the assets that suffered this current dip has slightly fallen. That’s why I initially said the trading volume is not solely dependent on the price change but the price drop has some insignificant effect on the trading volume.
When there’s a drop in the price of any asset, more traders set in the market to take advantage of the volatility to make some profits. In this case, there are both market makers and market takers in the market which means there’s liquidity in the market. As we all know, a highly liquid market attracts more traders. And when there are more traders in the market the cash flow of the market increases which means volume could increase. This brings us to the fact that trading volume is not necessarily affected by the drop in price. But rather provides liquidity to traders to take advantage of the volatility.
Relationship between the current instability and the Luna token
The Luna token is the native token of the Terra blockchain. Luna was ranked among the top 30 cryptocurrencies which suggest that the Terra blockchain had a very strong project and hence, the current crash was least expected to happen.
Usually when good tokens like this crash or face such catastrophe, traders in the crypto ecosystem begin to panic about the whole crypto ecosystem. Imagine Luna which is ranked among the top 30 altcoins and imagine steem which is just ranked about 170 to 200. You would begin to think anything can happen and start to sell your holdings if you have any.
However, from my experience, the Luna crash just happened at a very critical time to deceive traders to make panic decisions. I think the crash is independent of the current market dip. Most traders have sold their crypto holdings due to the crash just like how the whales want to manipulate the general market.
Looking at the Luna chart, the price reached an all-time high of about $120 and is now at about $0.002. This is more than a 10000 times drop. Talking from the current situation, there’s no guarantee that the price could bounce back at any moment. However, investing a few dollars wouldn’t be a bad idea who knows what could happen. Imagine investing just $20 now on the Luna and getting about 1000 times the same money. That’s about $20000 with just 20 USD. That’s a jackpot.
We could assume Luna is the biggest crypto scam in history or just invest very less now and wait in the long-term to see whether magic works. But technically speaking, Luna has no guarantee of any rise in the future. Although there is news circulating that the technical team of the Luna token is doing some burning to bring the token back again. But as I said earlier how true could this be. We can just take some small risks and wait for something to happen.
How the dip has affected steem
Just like the other cryptocurrencies, steem has also been affected by the current dip. Any steemian would bare with me that, even when steem was at $0.4, there was still stress on steemian how much more $0.2 and even $0.15. It’s heartbreaking.
Making a quality post that could have been curated for about 40 to 50 dollars and now around 15 to 10 dollars.
However, since the time I joined steemit, this is not the first time steem has gone this low. If I could recall, the last time BTC hit 30K there about, steem was trailing around 0.18 thereabout. But BTC is now around 29K and steem is almost 0.3 dollars now. This suggests that steem is performing very very well at this crucial moment.
Steem/USDT has recently been listed on Binance. As we could all recall, the moment steem/usdt was listed on Binance, we saw some bullish runs on the steem chart which kept some smiles on the faces of many steemians until the recent dip. But the steemit project has remained one of my favorite blockchain platforms. A very unique blockchain with a very special way to earn. I still think this is just the beginning of the steemit project. Steem on !!! 🔥.
CONCLUSION
Let’s all wait for some confirmations before we just into buying the dip. I still think it’s too early to buy the dip. All confluences are not yet aligned to confirm the bullish rally.
From my experience, the bearish trend could continue for about 1 to 2 months before any bullish rally.