As a seasoned researcher with over two decades of experience navigating financial markets, I’ve seen my fair share of market crashes and recoveries. This latest crypto market crash, while severe, appears less dire when considering the broader macroeconomic picture.
As a crypto investor, I’m feeling the turbulence today as the market takes a significant hit, reminiscent of the FTX crash back in November 2022. On Binance alone, Bitcoin has dropped dramatically to around $49,000, reflecting a steep 15% decline over the past day. The same trend is visible across other major coins, with Ethereum sliding by 20.4%, Binance Coin (BNB) dipping by 20.0%, Solana (SOL) falling by 18.4%, and XRP experiencing a drop of 17.4%. It’s days like these that make us question the market’s resilience, but we must remember to stay patient and keep our eyes on the long-term goals.
Crypto Market Crash Is Less Dire
Alex Krüger, a macro and crypto analyst, posits that the current situation might actually be more severe than it seems. His analysis suggests that the intense crash in the crypto market is not solely due to internal factors within the market, but rather stemming from broader macroeconomic policies. Specifically, he points out the divergence in monetary policies between the US Federal Reserve and the Bank of Japan as a significant contributing factor.
Krüger explained that the current predicament appears to be influenced more by broader economic factors (macroeconomics) than crypto-specific issues. Moreover, it seems the primary cause isn’t a potential U.S. recession (discussions about a recession intensified following last Friday’s payrolls report), but rather the Fed not lowering interest rates while Japan raised them. This observation is made in retrospect, and we now await US economic data to verify this assumption.
Krüger highlighted the connection between the recent market downturn and significant global financial occurrences. He explained that the sell-off began last week, specifically on the day of the FOMC meeting, and continued when the Nikkei market opened on Wednesday. Furthermore, he elaborated on why this situation might worsen. Regarding the financial crisis, he suggested that one driven primarily by a chain reaction of overleveraged Japanese speculators could be more favorable compared to one triggered by the United States entering a recession.
Krüger emphasized the significant importance of forthcoming US economic reports, particularly job market statistics. In other words, keep a close eye on initial jobless claims coming up this Thursday (not typically market-moving data), along with the State Employment data due for release on August 16th (offering detailed state-level employment figures, which are usually overlooked by markets).
The analyst noted that the situation could be even more severe, attributing the relatively contained fallout to the fact that the macroeconomic downturn was not triggered by a hard landing scenario. He stated: “BTW this is not about sugarcoating. What is lost is lost. Charts are REKT. But we really do not want to go into a hard landing scenario. I still don’t see it in the data.”
As an analyst, I’d like to contribute to the discussion by referring to insights from prominent crypto trader Daan Crypto Trades (@DaanCrypto). He suggests that we might witness a pattern in market recovery similar to past corrections, drawing parallels with the market’s response to the Covid-19 crisis. Intriguingly, he posits that the ability of average market participants to recall and apply the lessons from 2020 – specifically buying during the crash when stimulus measures were initiated – could significantly impact current trades. He even goes as far as to suggest that this could be one of the best trades of the past decade, across all markets.
While Daan underlines that history may not necessarily repeat itself, one might ponder if market players are more inclined to anticipate events based on past successes, a trend observed four years ago. I’m not suggesting this is the strategy, but it’s intriguing to observe how events unfold. First, let’s see if central banks will intervene promptly.
At press time, BTC traded at $51,927.
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2024-08-05 16:11