Over the past 24 hours, the crypto market has witnessed a severe downturn, with Bitcoin’s price tumbling down 15% to a low of $49,000 on Binance (BTC/USDT), marking a significant departure from its $70,000 high last week—a 26% crash. Ethereum’s (ETH) price also fell by 39% between $3,400 and $2,100. This trend wasn’t isolated, as it was repeated across the entire altcoin range.
Bitcoin Crash #1: Fears of recession cause bitcoin crash
Initial market volatility seems to be a result of fears intensifying about a US economic recession caused by Friday’s unexpectedly poor US employment data. The July report showed a gain of only 114,000 jobs—significantly below the Wall Street prediction of 175,000. The job gains were the lowest in December the year before and almost the lowest ever since the COVID-19 epidemic began.
Charles Edwards, Capriole Investments remarked Via X “Every single time the unemployment rate turns up as it has today, we have a recession. Just as the Fed was too slow to tighten in 2021, it looks like they were too slow to ease in 2024.”
The market was further agitated by the news that Warren Buffett’s Berkshire Hathaway had sold approximately 50% of Apple shares. Berkshire Hathaway’s sell-off of Apple shares was perceived as a hedge against market fluctuations, given that the company disclosed a record cash balance of $277 billion at its second quarter report.
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The Bank of Japan decision to increase its main interest rate from zero percent to around 0.1% to around 0.25% has also had significant consequences. The second rate increase since 2007 sent shockwaves throughout the global financial sector. In the past rate increases by Japan’s central bank were precursors of global recessions. After the announcement the Nikkei suffered its biggest 2-day fall in history. This was even worse than the Black Monday declines in 1987.
Nick Timiraos is often called the “Fed’s mouthpiece” I am a Wall Street Journal reporter. revealed, “Goldman Sachs says there are good reasons to think the rising unemployment rate in the weak-across-the-board July payroll report is less fearsome than normal…But raises its recession-probability-tracking odds to 25% from 15%.”
Goldman Sachs adjusted their expectations regarding the Federal Reserve’s policy, expecting rate cuts to be made at all upcoming meetings, and possibly a 50 basis points cut more aggressively if July’s weak employment numbers are repeated in August.
Second Yen Carry trade Unwind
The fall in the stock market was further exacerbated by a large movement on the foreign exchange markets, specifically with respect to the Japanese yen. The yen gained a lot of strength against the US Dollar after the Bank of Japan increased its interest rate. This action put pressure on traders that had been involved in trading. “yen carry trade”The borrow yen to acquire higher yielding US investments.
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Adam Khoo noted, “The sharp rise in the JPY/USD is causing a massive unwind of yen carry trade positions and contributing to the sharp decline in US stocks.” These trades have probably had an impact on the stock and forex markets, but they also cascaded into Bitcoin and cryptocurrency as liquidated assets were used to pay off liabilities and cover losses.
BitMEX’s founder Arthur Hayes made a comment via X. “My TradFi birdies are telling me somebody big got smoked, and is dumping all #crypto. No idea if this is true, I won’t name names, but let the fam know if you are hearing the same?????”
#4 Jump Trading With Large Sellers
On Sundays, when trading is usually quieter, there were unusually large sell orders across the major exchanges, including Kraken, Gemini and Coinbase. The unusual sell orders suggest orchestrated action by major players. This could be the result of firms like Jump Trading unwinding their positions.
According to reports, Jump Trading was involved in the substantial deloading of Ethereum worth $500 million over the past 2 weeks. According to market rumors, the sale could have been a strategy exit for Jump Trading from its crypto-market-making endeavors, or an urgent requirement for liquidity. Ran Neuner posted via X. “I’m watching this selling by Jump Trading […] They are the smartest traders in world, why are they selling so fast on a Sunday with low liquidity? I would imagine they are being liquidated or have an urgent obligation.”
Dr. Julian Hosp CEO of Cake Group suggested on X “The reason for the crazy crypto sell off seems to be Jump Trading, who are either getting margin called in the traditional markets and need liquidity over the weekend, or they are exiting the crypto business due to regulatory reasons (Terra Luna related). The sell-off is relentless atm.”
Mike Alfred highlighted It is possible that the market has been distressed, implying that there was a collapse of a Japanese large fund, which held significant amounts of Bitcoins and Ethereum. “A big Japanese fund blew up. Unfortunately, it was holding some Bitcoin and Ethereum. Jump and other market makers sensed the distress and exacerbated the move. That’s it. Game over. On to the next one,” Alfred Stated
#4 Liquidation Cascade Exacerbates Bitcoin Price Crash
CoinGlass reported that the market saw a significant increase in liquidity, as 277,937 trades were liquidated over the past 24 hours. This led to a total of $1.06 Billion in crypto-liquidations. Huobi had the highest single order of $27 million for BTC-USD.
CoinGlass reports that in the last 24-hours, a total of $302.07 was liquidated by Bitcoin longs. data. This forced liquidation, fueled by margin calls, stop loss orders and other pressures, has intensified the downward pressure, driving cryptocurrency prices further down.
#5 Trump Momentum Fades
A less important factor could be the changing political landscape. According to Polymarkets, Donald Trump is losing ground against Kamala Harris (Harris 43 % vs. Trump 54 %). The Bitcoin and cryptocurrency market is not happy about this shift. Trump is the market’s favorite. He wants to build The aforementioned “strategic Bitcoin stockpile” BTC said that over the weekend. could be used to pay off the US debt 35 trillion dollars.
#6 Mt. Gox Distributions still affecting market liquidity
The ongoing distribution of Bitcoins to the Mt. Gox exchange continues to influence Market. The market has been further impacted by the fact that former exchange users are receiving and possibly selling their Bitcoins.
BTC has recovered $52,909 at the time of publication.
Featured Image created using DALL.E and chart from TradingView.com
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Source: www.newsbtc.com
