Crypto Academy Contest / S1W4 – Reviewing the Instability of the Crypto Market by @prince4icon

Introduction

Greetings great people of Steemit Community! It a pleasure to be participating in this week contest!

Investors has been seriously affected and disturbed by the sudden fall in the price of Crypto currencies, this situation has really raised so much fears and questions around investors and is equally scaring away new investors that maybe having the interest of investing in the Cryptocurrency world. I personally saw how a crypto currency coin that is highly rated and highly sorted out for can drop within few days and become so insignificant. This decline in the Cryptocurrency market did not only affect crypto currencies, but some other digital coins alongside US equity market.

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?

Source

The drop in the Cryptocurrency market has not really been a good one because most persons that invest in this market commit their all to this market. If this decline persists I believe most investors would withdraw their investment from the Cryptocurrency market which would really cause more harm to the market and would cause more lost to other investors who believes that no matter what happens the Cryptocurrency market would bounce back again. If the decline continues it would make the market look insecure for many investors, because every investors seeks a market where their asset would be secured.

There may be some many reasons the Cryptocurrency market is experiencing this decline, but the following reasons stand out for me;

Volatility of the Cryptocurrency

Cryptocurrency is a volatile asset, which means that it has the tendency of moving up or moving down within a very short time. This is something everyone investing in Cryptocurrency market must acquaint themselves with so as not to be too affected by the movement in the market. Volatile asset are not to be trusted when it comes to investment because their movement in the market are hardly predictable. The same asset that rose very high can still fall very low, so this is one of the reasons for the decline for me...

Top Investors withdrawing their investment

Most times when top investors senses that the market is going to move down they withdraw their investment in a bid took seek for a safe ground.... This withdrawal of investment by top investors has a way it pulls the market down.....

The duration of this decline in the market maybe difficult to predict, but for me I believe that as long as the top investors keeps withdrawing their investment the downtrend will continue to happen, but if more investors comes into the system with good investment it would reduce the duration of the downtrend. The duration is dependent on the actions of the top investors....

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 reason most investors commit their investment into any kind of market is for them to make meaningful gain and not for them to loose their investment. Trading volume talks about the amount of a particular asset that is traded in given period of time or you can define it as the amount of traders that are committed to a particular investment in a given period of time. Cryptocurrency such as Bitcoin is one of the Cryptocurrency with much investors, not just that, it is also one the most expensive coin in the Crypto currency market. The reason most of the investors are still committed to it even with the drop in price is so as not to incure much lose. Opting out from the market at a time like this means that that investor would leave with an amount lower than what he came in with, so every trade is optimistic that the price would rise and return back to normal, so that if one is withdrawing, he won't withdraw with much loses.

Secondly, new investors are trooping into the market because they know that this is the best time to trade because the price of the coin has go down, so that when the price goes up they would have much profit.

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 last few days especially last week has not really been good for the Cryptocurrency market because of the sudden fall in the price of Crypto currencies which was linked to the drop of a stable coin called TerraUSD (UST) and it sister currency Terra Luna. This crash is the cause of the present instability in the Cryptocurrency market which had great impact on currencies like Bitcoin and Tether.

Source

TerraUSD and her sister currency Luna are stablecoin which are designed to be less volatile like other Cryptocurrency such as Bitcoin and others. These currencies are designed to be pegged to an asset such as the US dollars or the Euro. These currencies act as safe zone to Investors during the period when Cryptocurrency swings down.
A stablecoin pegged to the US dollars is expected to maintain it value as $1 at all times, even if it want to fluctuate in it value, the difference is always a little value away from the US dollars. But what happened last week was that the Terra Ecosystem which was meant to be a stablecoin and a less volatile Cryptocurrency was seriously affected such that it went down below it expected value.

TerraUSD and Terra Luna works with the principle of a seasaw. TerraUSD is always expected to be $1, but Terra Luna can fluctuate. So whenever there's a drop in TerraUSD Terra Luna is always what is used to bring back the desired balance. TerraUSD make use of Terra Luna as a counterweight to maintain it required value.
This system of balancing TerraUSD with Terra Luna and vice versa broke last week.

One of the reasons so many investors acquire TerraUSD is because of something called Anchor. This Anchor works like a savings account, but it gives 20% of whatever TerraUSD invested in it. From my research I found out that more investors purchased TerraUSD and Stored it in Anchor because of the 20% benefits, but earlier this year specifically around match Anchor decided to replace the 20% profit to a variable profit rate which was not disclosed, this decision made many investors to burn their TerraUSD for Terra Luna which made TerraUSD drop as low as $0.14 and as more and more investors dumped their TerraUSD, TerraUSD crashed same as Luna.

This crash that happened to TerraUSD and Terra Luna affected other Cryptocurrency because like other financial System, Cryptocurrency market is intricately connected, so as TerraUSD crashed the fall affected other Cryptocurrency, hence the market instability.

Weather it would bounce back or not will be strongly dependent on what the owners of the Terra Ecosystem would do. If they allow the crash get so much into them as it got into some of the investors that attempted suicide, then the coin may not bounce back, but if they sit down and restrategize I believe the price would rise in no time.

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

Anyone entering into the Cryptocurrency Ecosystem without a preparing his mind to accept whatever he meets in the system would not do well. The fall in the price of Steem really affected so many steemians both positively and negatively, but for me it affected me positively because it happened around a period when I wanted to acquire Steem, so the fall in the price gave me access to much Steem with little amount.

This is not the first time the Cryptocurrency Ecosystem is experiencing such a down time. Bitcoin which was the first Cryptocurrency to be known began it journey gradually, between 2009-2015 it recorded series of rising and falling in it price. In April 13 2011 we saw how Bitcoin jumped from $1 to $29.60 which was a serious profit but by mid November that same year there was a recession which led to Bitcoin dropping to $2.08. The price of Bitcoin went very high in 2021 to $60000 which also drop to $29796 in July that same year.

From my analysis above you will agree with me that what the Cryptocurrency Ecosystem is experiencing presently was not the first time it's experiencing it, and this experience has not come to stay, it only something that would fade away with time and enter into the Chronicles of history. So am confident that the Steem Ecosystem has come to stay and that better days lies ahead for this Ecosystem.

I invite @nanya to participate in this contest.