Steemit Crypto Academy Contest / S1W4 – Reviewing the Instability of the Crypto Market by @jasminemary
Hell friend
Greetings to you my fellow Steemians. How are you doing today? I believe that you are very much fine and catching fun with your love ones. In this post that you are about to start reading through, I have shared my review base on the recent instability of the crypto market. Without wasting your time 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?
Honestly, eversince that I began trading in cryptocurrencies, I would say that last week was a very horrible week for me and others crypto traders and Investors in the crypto market. You can imagine having $500 in your portfolio and the next day your $500 becomes $1.
The drop in the crypto market affected most of the cryptocurrencies which make their prices to decline so sharp most especially Luna coin which a lot of people believe is the architect behind the sharp decline.
Even the top trending crypto like Bitcoin, Ethereum and even Steem coin was all affected. As for Bitcoin (BTC), it feel below $27,000 for the first time in 1 year and 4 months, which cause a massive sell off in the entire crypto market and also to this over $200 billion dollars worth of crypto was wiped out from the crypto market in one day.
Ethereum (ETH) which was trading at above $2,000 equally experienced a sharp decline because the price fell below $1,603 for the first time ever since last year around June.
Steem and others cryptocurrency also experienced this sharp declined. Steem that was trading at $0.437 suddenly fall as low as $0.2667.
Luna token is the worst of all that experienced a sharp decline in the crypto market and I believe is the cause of the sharp decline that occurred recently. Now before, I will move further, by stating the causes of the recent drop in crypto, I will like to share what I think with you.
What I think about this drop
What I think about this drop is that it has scared a lot of Investors away from the crypto industry must especially that of Luna coin where a lot of Investors lost their funds within a twink of an eye.
The drop affected majority of all the cryptocurrency that even Bitcoin fell down in such a way that crypto traders and Investors are now afraid of buying Bitcoin or any other cryptocurrencies because of the fear of losing their funds. I think the major cause of the drops is what happened to Luna foundation since the company sells a very huge amount of it Bitcoin holdings to share up its ailing stablecoin which is the UST.
In a nutshell, to this I think that it is because of the fall of Luna coin that led to the fear of Investors investing in cryptocurrency because no one want to lost his/her money just the way some have lost they own in investing in Luna coin.
The major causes and how long I think it will continue in a downtrend.
Actually, the major causes of Luna and Terra USD is the issue of balance the both coin together that broke out the both coin from each other.
What actually happened was that the founder of Terra Lab Foundation Do Kwon who is known to be someone that love posting annoying words on Twitter, started feeling that he may got attack one day. The founder of Cardona coin Charles Hoskinson, then make a post on his Twitter account which was later deleted by him.
According to Charles Hoskinson post on Twitter, he said that a large firm borrowed over 100,000 thousands Bitcoin from an exchange called Gemini which was exchanged for a huge amount of UST. (i.e that is the Bitcoin was exchange for UST) with the founder of Luna for a discount price.
The statement continue when he then said that majority of the firm (institution) has dumped a large sums of Bitcoin and UST on the crypto market causing a serious liquidation fall or longs leverages, fear and slippage which forced Investors to unstaked both their UST and Luna for a sell off.
The tweet makes a lot of Investors to believe that Terra was a ponzi scheme since the company didn't have enough of Bitcoin as a reserves to prevent the sharp drop.
There was a lot of claimed that was coming, where some are saying that is someone that launched an attacked on Terra which cause a massive sell of and a massive sharp drop of Luna coin that was trading at $112 before it then fell so low to $0.00000021 cent.
As at the time that Luna coin drop down to about 100% exchange like Binance and others has already make a statement that Luna coin will be delisted from their exchange if the coin should fall below $0.00005.
However, Luna was delisted and listed backed after gaining over 1200% growth.
For now, I think the Terra Luna will continue in a downtrend for a long time before rising because Investors are now afraid of the coin.
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?
Well we all know that the crypto market, is just like our traditional financial institutions, that is entwined intricately with each other. Few coins decrease their trading volume as TerraUSD (UST) fell down, which the losses affected other coins as well.
At first, Both Luna and UST falled down to $0.96 dollars on 12th May 2022, which it they later rebounded to again to be match the price of US.dollars which didn't workout. Instead the both coin kept falling.
Now immediately, Luna fell so dip, that was when Bitcoin (BTC), then fell to around 27,000 on that same day which was 12th of May 2022.
The thing was that it's not just Bitcoin that was affected but the entire cryptocurrency market was affected and their dropped (slashed) by more than half eversince their was slashed. According to Coinmarketcap trading volume, a lot of crypto felled from $2.93 trillion dollars to $1.2 trillion dollars which part of what decrease their trading volume.
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?
Terra ecosystem and it's Luna currency downfall is what is majorly trending in the crypto market. TerraUSD (USDT) is among the algorithmic stablecoins that tried to maintain the same value of other stablecoin that flow with US dollar. The algorithmic stablecoins make use of a complex mechanism that is link to cryptocurrency, which is known as Terra Luna (Luna currency).
In the Terra ecosystem, 1 TerraUSD (UST) is supposed to be flowing with $1 dollar, but the price of Luna currency can fluctuate above $1. This is where the both coin now have relationship between each other since the Luna currency is what TerraUSD (UST) use to sustain/maintain it stablecoin that is peg to $1 US dollar.
The coin works in a way that by burning TerraUSD, to create or mint Luna currency and so on. In this case the burning of 2 TerraUSD simply means that one will get $2 dollar worth of Luna currency.
TerraUSD is a coin that was hold by thousands of people and the reasons was because of it Anchor Protocol that lot of people trust in because they can save their TerraUSD, to earn over 20% as interest.
Do you think its price will bounce back? If so, tell us how and when?
The crypto market is sometime that is hardly for someone to predict correctly because of how volatile the market is. As for Luna currency, I don't think it price will bounce back soon. Why did I say it will not bounce back soon is because the currency has cause a lot of harvoc in the crypto market.
Because of the suddenly fall of Luna currency thousands of Investors lost they funds and majority of them are now even afraid of investing in other cryptocurrency. As long as Luna currency keep on existing it will take a very long time for the price to bounce back.
The pullout of TerraUSD from Luna currency led to completely collapse of Luna currency and today Investors and traders are now afraid of Luna currency. With all what has happened in the Terra ecosystem, I don't think that the price of Luna can even bounce back to $1 within this year.
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
As for Steem ecosystem, I still have confident in they project come rain come sun I will still be investing in Steem ecosystem if I have the money. However, Steem went low and thank God today is bouncing back gradually which is to show how powerful the Steem ecosystem is.
As at last week between Wednesday to Thursday when the entire crypto market began to experience a sharp downturn, the first coin that came to my mind was Steem but after looking at the value of my Steem on my Binance exchange I became stronger the more because it value was more okay than other cryptocurrency that I have in Binance.
Some of the reasons that make me to still have confident in our Steem ecosystem, was that at first when the entire crypto market was fallen down I was hoping if Steem ecosystem or someone else will say anything concerning the project whether Steem is going to be affected or not but I didn't see anything.
My confident in this great project became stronger again at the time that I read about what Tron (TRX) founder Justin Sun did in the Tron ecosystem where he supported the Tron ecosystem with over $2 billion dollar to withstand any attacks.
Finally, to this as of last week when I claimed some of my rewards on Steemit I didn't claimed SDB I became afraid thinking that Steem ecosystem had been affected until I read through @sapwood and @frequantum post concerning "Debt Ratio Analysis.
Debt Ratio impact's on the author reward on Steemit
By @fredquantum
Understanding Debt Ratio & its effect on Author Payout
By @sapwood
After reading through these two users post which is shown above, i regained my confident back because i came to understand the reasons behind the disapeared of SDB rewards for the main time.
Conclusion:
It is of no doubt that the entire crypto market experienced a sharp downturn which most of cryptocurrencies including Steem coin has started bouncing back aside Luna currency which is still trying to move above cent. I thank you so much my dear friend for time you have spent here.
In this contest I am inviting @nancygbemi, @simonnwigwe and @preye2 to also join me and participate.
You have written perfectly very well about the instability in the crypto market. You have also clearly state how it has affected the steem blockchain system. The debt ratio that is seen in the steem blockchain brought a lot of fear but thanks to the two profs that gave us an insight explanation on the happening. Steem on my friend
Thank you very much sir for reading through my post am grateful.
Well explained post friend. You have explained very well about the reasons of this huge drop. Actually, the investors became worried when they saw the LUNA token trading below $1. Many if the newcomers thought that it was the end of the LUNA. Moreover, many others lost their believe on the UST stable coin. Therefore, they left the market and the dump became more dense.
Thanks a lot for sharing with us and wishing you all the best in the contest my friend.
Thank you very much for reading through my post. Honestly, everyone was afraid concerning what happened last week in the crypto market. But all thanks to God things are getting better.
It is true that the crypto market can get very unpredictable and unstable, but last week was really a dip. Nevertheless, the crypto market was made to exist in this form, so I am still confidence about the market, as this is just a phase.