Crypto Academy Contest/S1W4 - Reviewing The Instability Of The Crypto Market by @jueco

Hello Crypto friends,

It is an honor to be among the few participants of the week4 engagement contest of the steemit crypto academy.

This week we shall be discussing on the instability of the cryptomarket, how and why cryptocurrencies have been on a bearish move lately.

Join us as we begin this fun-filled adventure.

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 I THINK OF THIS DROP

There is no doubt that we have seen the surging drop in the price of the cryptomarket lately.
And this drops gives different individuals different reasons and opinion to it's cause.

Many individuals view this as a technical reason, other analyse this using sentimental analysis while some base their opinion on fundamental analysis.

Little wonder why all crypto traders are advise to invest what they can afford to loose, this is being adviced because one minute, there's increase in price and the other minute, there's decrease in price, right to where it started.

The cryptomarket is deeper than a research work, although thorough research helps most times.

The volatility of the cryptocurrency despite having good fundamentals is affected by the rate of demand and supply.

Personally, my opinion to the reasons for this drop is based on two approaches:

• TECHNICAL APPROACH:

From the perspective of a technical analyst, I feel that this drop happened because of the inability if Bitcoin to break above it's previous all time high.

As we know, 2020/21 happened to be the best year for cryptocurrency, seeing Bitcoin break above $60k.
And ever since then, bitcoin have not been able to break above that resistance.

^{SCREENSHOT FROM TRADING VIEW}

The above Screenshot is the price chart of Bitcoin on a daily time frame, and as seen above, Bitcoin has failed to continue forming new highs, instead, it keeps forming lower lows, and all Altcoins follows the market trend of Bitcoin.

• FUNDAMENTAL APPROACH:

Truly, the price of cryptocurrency is mostly affected by news, announcement, and this we all know.

Just last year after Bitcoin reached it's all time high, there was a regulation by the chinese government and also an announcement that Bitcoin will no longer be accepted as a medium of payment to the Tesla group of company.

This negative news had a great impact on the price of bitcoin and Altcoins, and this shows that news and other crypto related announcement affects the mentality of traders, thus pushing them to either buy, sell or hodl.

What I personally think of this recent drop is that it was triggered due to the pressure that the crypto ecosystem faced from Central banks, government and other regulatory bodies.

Here in Nigeria my country, banks have been prohibited from having any crypto related transaction.
A decree has been made by CBN that any banks caught having dealings with cryptocurrency should be immediately blocked.

And of recent, the Us-based regulatory, alongside SEC has promised to increase the scrutiny on Crypto Exchanges and this has made many investors sell off their assets.
They are all trying to prevent loss of funds.

Source

Personally, I feel that this drop in price is affected by several factors, we also have the warm hole attack on UST which will further be explained.

CAUSES OF THIS CURRENT DROP AND HOW LONG IT MIGHT LAST

As I have earlier explained, this drop in the price of cryptocurrency did not start now.

It is something that started last year due to the regulation made by the chinese government, and this created FUD[Fear, uncertainty and doubt] in the minds of traders.

Well, despite this, the price of Bitcoin and other Altcoins struggled to form new highs, not until a warm hole hack which reduced the price of UST on the 9th of May.

From this attack, we saw the price of Terrausd drop from a pegged value of $1 to 0.98cent, which made investors dump it for other stable coins.

The dump of UST was quite a considerable amount, above $1.80million worth of UST was dumped in exchange for USDT and USDC, and this further contributed to the fall of UST which greatly affected the price of it's sister token, Luna.

In conclusion, I will say that the recent fall in the price of cryptocurrency was not only caused by governmental authorities and Chinese regulation, but it was also ignited by the worm hole attack which led to the unpegging of UST from USD.

HOW LONG DO YOU THINK IT WILL CONTINUE IN THIS DOWNTREND

The cryptomarket as I earlier explained is affected by the rate of demand and supply, and is not controlled by a single individual.
So it is not in the jurisdiction of any individual to state the exact time when the downtrend will end.

Personally, I can't foretell how long this downtrend will continue, but through research, I came to understand that we are in a bearish market and this downtrend might continue for a while.

Some analyst project 2years to be the end of this bearish market, but it's not yet certain, and I personally believe that this bull run cannot continue until the next bitcoin halving.
The next bitcoin halving which is projected to occur in the year 2024 will definitely boost the price of the cryptomarket.
For more information about Bitcoin halving and how many blocks remaining to be mined, visit my post.

I also proceeded to conduct a technical analysis on bitcoin, using a weekly time frame.

^{SCREENSHOT FROM MT4}

From my analysis above, I saw the chart of btc forming a double top, which is a strong bearish trend reversal pattern.

And also, I noticed that the fast moving average was angled downward, about to form a bearish crossover of the moving averages.
These analysis further strengthen my conviction that the downtrend of the crypto market will continue for a while.

WHY DOESN'T THIS DROP IN THE PRICE OF A FEW COIN DECREASE THEIR TRADING VOLUME [E.G BTC]? HOW WILL THEY DEAL WITH THIS MARKET INSTABILITY?

The crypto trading volume can be described as the estimated numeration of the activities of buyers and sellers within a specific time frame.
The trading volume helps to show the rate of capital outflow and inflow in an exchange.

In another word, the trading volume displays the hierarchy of the monetary activities being carried out on different exchanges and in different cryptocurrency.

The drop in price of few coins did not decrease their trading volume because of the continuous on-chain activities carried out on the exchange.

As some traders are busy exiting the market by selling off their shares, others are busy entering the market and taking full advantage of the fall in price of commodities, thus stabilizing the trading volume.

The slight decrease in the price of USDT from it's pegged $1 value to $0.998 can justify the above explained.

Source

Usdt lost its peg value after btc decreased to it's lowest attained price of $26k.
It lost it pegged price of $1 as its holders began to sell more USDT to acquire BTC.

As shown above, although there is decrease in price of different cryptocurrency, it's trading volume remained stable and this is due to the continuous on-chain activities done on the exchange.

And many experience traders take advantage of fall in asset to acquire more cryptocurrency, especially Bitcoin, Ethereum etc.

Source

WHAT IS THE RELATIONSHIP BETWEEN THE CURRENT INSTABILITY AND THE DOWNFALL OF THE TERRA ECOSYSTEM AND ITS LUNA CURRENCY?
DO YOU THINK IT'S PRICE WILL BOUNCE BACK? IF SO, TELL US HOW AND WHEN.

The Terrausd can be described as an algorithmic stable coin, this means that it posseses the same value as USD by making use of a complex mechanism with it's sister cryptocurrency called Luna. Luna and Terra are developed by the same developers.

In other words, Terrausd can be explained to be a stable coin pegged to USD through an on-chain mint and burn mechanism.

This further implies that Inorder to acquire 1 UST, a user tend to burn $1 worth of Luna.
This UST is expected to have maintained it's pegged value of $1, but due to the wormhole attack, the UST value dropped below $1 and this distabilzed the on-chain mint and burn mechanism of Luna and UST, thus making it difficult for Luna and UST to be redeemed for BTC, which functions as a reserve cryptocurrency for the algorithmic stable coin.

Source

And this moved holders to simultaneously dump UST and Luna which led to an excessive mint of luna, thus increasing it's total supply from 1billion to 6trillion in less than 7days.

WILL THERE BE A BOUNCE-BACK?

Although the cryptoworld is unpredictable but I doubt if UST will return to it's $1 pegged value, and neither will luna.

The reason for my doubt being that a huge amount of money has been lost in this project and this has shown the unstable rate of algorithmic stable coin.

For this project to bounce back, it would need the investment of lots of money and this would require the joint effort of different large scale investors.
And that being the case, no investor will want to risk their funds just to revive a fallen project.

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 ON THIS PROJECT? GIVE YOUR OPINION, SPECIFYING THE ARGUMENT THAT SUPPORT YOUR REVIEW

Of course, the bearish move of the entire cryptomarket also affected our beloved ecosystem.

The steem blockchain designed and run using a POB consensus mechanism, rewards its users [content creators] through its native token [steem].

This bearish trend pushed the value of steem and SBD by -30%, thus taking it to a debt ratio of above 26%.

As one of the holders of steem token, this bearish move of steem and SBD has stressed me out in different ways.

The first being the lack of sbd printing, as it used to be before.
This tends to reduce the reward I receive as a user.

For example, in my recent post which has a vote of $9.55, I was supposed to receive a reward close to 2SBD but due to the bearish move of sbd and steem, I will be claiming no sbd.
Take a look at my screenshot below.

Source

And also, the value of my steem wallets has dropped over time since the bearish move began.

One funny but sad experience I had was that despite my numerous power ups, my account value has still been reducing and I know that this is because of the bearish market.

I am 100% confident that steem blockchain will overcome this bearish market, just as it has done before.
There are different basis on which I place my confidence on steem blockchain:

• The first being the numerous power ups made by users on steemit platform, it helps to lock numerous amount of steem token from circulation.

• The second being the declination in the print out of SBD.
  This will help to boost steem economy and bring back the price and even improve the price of steem token in the market.

CONCLUSION

The bearish move of the entire market has caused lots of damages to crypto investors, more especially people that invested a lot in Luna token.

From this drop in price, I have learnt to invest only what I can afford to loose as the cryptomarket is unstable with high volatility.

Thanks for reading!!