Steemit Crypto Academy Contest / S1W4 - Reviewing the Instability of the Crypto Market by @zahid1231

Good day lovely steemians! Welcome again to the fourth week of the steemit engagement challenge initiated by the steemit team. The previous week was very successful and this reputable community recorded about more than 50 entries in each week. This week's contest is a very interesting one because it gives participants the opportunity to air their opinions about the current crypto market instability.

The present happenings in the crypto market have called for a review from different analysts regarding when the entire dip will be over and many more things that are going on within the crypto ecosystem. In this blog, I will be presenting my little review on the said topic as well. Let's get started.

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?

Everyone knows that the price of cryptocurrency is volatile, meaning that the price changes(rises and falls) within minutes and one cannot actually predict how much the price of a cryptocurrency will be. Recently, the cryptocurrency market is experiencing a sudden price decrease of all the cryptocurrencies making all the crypto holders or HODLer's to face phsychological trauma. An online tweet from twitter has made us know that about 8 person's committed suicide amidst the recent decline in the crypto market.

A lot of people were so scared and also thought that the world of crypto will be crumbling soon but those who have seen this before are not disturbed because they know that things of this nature happen in the crypto ecosystem. In trading, the market is always affected by either the demand and supply or the psychology of the traders.

As we all know the basic reason why prices of asset drops are because of the selling of the asset we have acquired. The more we sell, the more the price drops down and the more we buy the more the price goes higher.

To me, what I think about this drop is that it came as a result of information circulating on the air about the rules and regulations given by the securities and exchange commission (SEC) on cryptocurrency users. That led to fear among crypto owners and then it leads to their selling of the asset that they have acquired.

The causes of this dip in the price of cryptocurrencies can be attributed to bitcoin using its technical analysis and fundamental analysis. We know that anytime bitcoin is dropping, it drops mostly with another crypto asset as well. So from the technical point of view, we will notice that the price of bitcoin couldn't break the initial support level and that lead to a trend reversal in an opposite direction. Let's consider the chart below.

From the above screenshot, we can see that the initial support level was broken and which lead to the reversal of the trend to the opposite direction and which led to the fall or drop in the price of most crypto assets.

From the above screenshot, we can see that the initial support level was broken and which lead to the reversal of the trend to the opposite direction and which led to the fall or drop in the price of most crypto assets.

In the case of when the downtrend movement will end or how long this dip will continue, I don't have a complete idea about that. But I am sure that it may take a little while for the entire crypto asset to recover from this dip. Using the technical analysis, we can only predict the main time that the asset will reverse from the support point via a proposed resistance point but we can not say when the price will completely appreciate again.

To me, this will only be possible if more investors come into the crypto market again. A lot of investors have removed their investment and that led to the dip so for the price to rise then the investors have to put in their investment again.

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 Trading Volume is just simply the record of the amount of purchase and sale(trading activity) on a given asset. It is the sum of the total purchase and total sale on a given coin over a given period of time. Trading volume can serve as technical indicator for traders to know the liquidity of a particular asset.

The rate at which these asset changes hands frequently, it's value and popularity can be ascertained. Despite the drop in prices of few coins, some coins like Bitcoin trading volume does not decrease, this is because, some traders take advantage of the bearish market to purchase bitcoins thereby making the coin trading volume to be stabilized.

As explained earlier, trading volume of a given asset tells traders how a particular coin is being traded and how liquid the coin is. The trading volume is calculated thus, "the combination of aggregated data from all the exchanges".

In as much as bitcoin is concerned, they can always deal with market instability. This is traders major coin, they always take advantage of the price drop of bitcoin to acquire more of the coin because it is believed that bitcoin has a great value and high utility, thereby making the coin to be highly liquid having a significant amount of trading activity on the asset over a given period of time, i.e. people buy and sell the coin on every exchanges combined together over a given period of time, however, this high trading volume of bitcoin helps it to deal with market instability and make the coin more stabilized.

Currently, the trading volume of Bitcoin is $32,706,230,501 in the last 24hrs on Coinmarketcap.

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 relationship between the current instability and the downfall of the Terra ecosystem is that the stable coins of the Terra ecosystem which were pegged to US dollars lost their stand due to some form of investigation made by the securities and exchange commission. According to SEC, Terra stablecoin does not meet the criteria of having its stable coin pegged to US dollars.

With this rumour, the UST which happens to be the Terra stable coin dropped in its price and investors started withdrawing their assets from the project and tagging the project as an untrusted project. This drop in the UST leads to the drop in the price of the luna token as well. Investors lost trust in the asset and started withdrawing their entire asset.

Will it price bounce back

It will be difficult if not impossible for the price of the asset to bounce back. The reason I said this is because a lot of people have already lost hope in the project. And since the stable coin of the blockchain is no longer pegged to US dollars, it will even be more difficult.

For the price to move back, a lot of investors will have to put billions of dollars into the project again which I don't think anyone is ready for the risk. Though there are plans as Twittered by the founder of the ecosystem Do Kwon that plans are been made to recover the luna token even if the UST pegged won't be possible.

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

Indeed all crypto assets were affected as a result of this dip. The steem ecosystem was not an exception as we saw clearly how the price of the asset depreciated alongside the other currencies. In my case, the decrease caused me a lot of stress and even panic most especially when I receive a payout with steem, steem power and eliminated the SBD.

This was my very first concern and I was taught that the steem blockchain project too will go the same way the Terra blockchain is going. I was so concerned until a saw a post made by two of our professors in the persons of @sapwood and @fredquantum where they explained extensively what debt ratio is all about in the steem blockchain.

After reading the post, I discovered that SBD normally vanish when the price of the steem token becomes too low and this is to keep the SBD printing in check so that its value will still be maintained. So with all these findings, I regain lots more confidence in the steem blockchain because I also went as far as reading through the project white paper where all these cases were stated.

Conclusion

The dip in the crypto market recently affected eventually all crypto assets. A lot of people have gone as far as removing their entire assets in the crypto project because of the entire scenario. The steem blockchain was not left out but after reading through the white paper of the project and learning about the debt ratio, I became more confident in the project.