Steemit Crypto Academy Contest / S1W4 – Reviewing the Instability of the Crypto Market by @nwabueze
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?
Since the advent of cryptocurrencies, the world has not remained the same. Crypto plays a huge role in global decision-making in the world today, whether directly or indirectly. For about a week now the dwindling prices of various cryptocurrencies have raised some questions and speculations all over the place. The recent fall in prices of cryptocurrencies is seen as a cascading effect of bad decision-making on some powerful players in the crypto market.
Whenever this recent fall in prices is mentioned, what comes to the minds of so many people is LUNA/TERRA, and that is very understandable. TERRA is a coin that was designed to simulate the real USD such that its value cannot easily be changed for any reason. It basically works on a mathematically simulated economy to try and copy the real-world economy and the USD. It was basically made to be a stable coin such that it would be pegged to the USD. TERRA and LUNA are close coins because they rely on each other to function efficiently and flawlessly. Based on the design, LUNA can be gained by burning Terra and the other way round. What led to the crash of the LUNA TERRA market was the fact that TERRA(UST) lost its peg to the USD and for that reason, the prices plummeted.
Since TERRA can be burnt for LUNA, a lot of people did the exchange in other to get LUNA which seemed more stable. But as the pressure increased on the sellers, people started panicking, speculations started to spread. As we all know, when people are scared they tend to make numerous irrational decisions. As the price of LUNA fell, it had a cascading effect on the market which eventually crashed other coins. It really hit the market badly.
This massive reduction in price goes to show that people tend to be overly confident about things they actually have no control over. Creating a coin based on mathematical simulations sounds really smart but it is not very good in reality, as we have clearly seen over the past weeks.
Whether or not I think the price will come back. Definitely, the prices of crypto will come back up, I am very sure of that. The fact that we are humans makes me very confident because we are very emotional. For TERRA LUNA, it could grow significantly with new plans and strategies in place, but I certainly do not think the former prices can be attained.
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The chart above indicates a slight recovery by LUNA which is quit good. With this we have a support point and we can hope for significant growth.
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 decrease in the prices of coins happened like a chain reaction and that is not unfounded. The value of a coin can be reduced momentarily but that does not necessarily affect the way people buy or sell it. What could happen is that the pressure will be much on either of the parties involved; buyers or sellers. Take Bitcoin, for instance, the users trust the blockchain implicitly and as such, they will be relentless. No matter what happens, they know the coin will always be there although variation in prices may be experienced to some extent.
As the market is unstable right now, some people are interested in accumulating coins while some other people want to get rid of the coins in their possession. So many people will lose their holding positions as a result of fear, doubt, and other factors that may be considered.
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 current instability of the TERRA ecosystem and LUNA is as a result of how strongly they rely on each other. They are fundamentally demendent on the success of each other for survival and trading. The fact that Terra can be gotten from burning luna and luna can be gotten from burning terra even makes them more vulnerable. As I said earlier, the value of Terra which was tied to USDT started fluctuating and for that reason people decided to do away with their terra and only possess luna. The fact that they are tied means that any significant change that affects one will definitely affect the other.
A coin falling to below $1 from $100 makes it a huge gamble. No one would like to take such risk. I am an example. I lost the money I invested in LUNA and that left me traumatized and depressed. Luna going back to where it was in a no for me. I sincerely do not see it rising to its previous price.
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
About a week ago, the price of steem was in the range of $0.4 - $0.45 while its parent coin, SBD, was valued at about $5.
STEEM has surmounted some relatively turbulent periods so it is not really new to the ecosystem. Steem is the native coin of the platform Steemit and to that effect users of the platform are rewarded with steem for making posts. The recent downtrend happening in the crypto market hit the steem blockchain hard but slight recovery moves have been noticed. I personally was affected by the down trend, as other users of the blockchain, so I share their pain. The reward I was supposed to get for a post I made last week lost almost a third of its value as a result of market movement.
Speaking of the project, I am very positive that it will stand strong during the difficult times. Steem has been integrated with Tron in the past and that further mustered its credibility. The main thing that drives the market it emotion. Humans tend to be emotionally attached to their dealings and that plays a vital role in the growth of a platform like Steemit. Steemit is a platform that aims to revolutionize social media and make it more appealing to the general public. The fact that people get rewarded for their input means a lot to them.
A positive side to this is that users can gain more power over the platform by investing in the native currency and in return they get rewarded as curators. We all like to succeed and that is the main thing steem offers. Steem has a very bright future ahead of it and I am very glad to be a part of it.
CONCLUSION
The recent downward movement in the prices of crypto really took the market by surprise but it is nothing new to the market and they people because we are the market. Prices go up and down and not every crypto project ends up reaching their full potential. I made losses this period but it is definitely not the end of life. We must all remain strong during this period of weakness.