Crypto Market Recovering From Steep Correction, Here’s Why

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As a seasoned analyst with over two decades of market experience under my belt, I’ve seen more than a few market rollercoasters in my time. The recent events in both the crypto and Japanese equity markets have been nothing short of breathtaking.

Following the violent incident on Satoshi Street on August 5, the overall cryptocurrency market has been rebounding nicely. The price of Bitcoin climbed over $55,400, representing an increase of approximately 8% from its lowest point yesterday, and many alternative coins (ALTs) have gained anywhere between 5% to 10%.

Following a significant 13% drop on Monday, August 5, Japan’s Nikkei 225 Index has shown resilience and surged over 10% during early trading on Tuesday. This impressive rebound is largely due to the robust recovery in the US futures market, providing a glimmer of optimism amidst the otherwise somber market conditions.

Crypto Market Recovery Revives Hopes

As a researcher, I observed a robust rebound in Japan’s equity market on Tuesday. The two leading indices, Nikkei and Topix, surged by approximately 12% each earlier today. Remarkably, the upturn in the US futures market served as a buffer, averting an additional plunge not only in the Japanese market but also in the cryptocurrency market. According to Tomo Kinoshita, a global market strategist at Invesco Asset Management based in Tokyo, these developments underscored the interconnectedness of global financial markets.

“With a recovery in Japanese stocks, it’s expected that other Asian markets will follow suit today. It seems that the drop in Japan’s stock prices the previous day was significantly larger than in Europe and the U.S., leading investors to believe that the correction in Japan’s market the day before might have been overly harsh.”

Cryptocurrency investors seized this chance, buying drops in price that JPMorgan had previously forecasted. Bitcoin has surged by 3%, exceeding important support points at $54,000. From yesterday’s lows below $50,000, the Bitcoin price has risen significantly by over 10%, a move that market experts like Michael Saylor have demonstrated faith in by holding onto their Bitcoins.

1. A significant increase in the value of the Yen prompted a reversal of the Japanese carry trade, resulting in turmoil across worldwide stock markets for the past three trading days. This turbulence sparked concerns about a potential swift escalation towards an economic downturn in the United States.

Fed Rate Cut Soon?

Initially, there were rumors about an emergency gathering at the U.S. central bank due to the deteriorating worldwide market and anticipated interest rate reductions. Contrary to expectations, no such meeting took place on Monday. Nevertheless, the U.S. stock market demonstrated a powerful rebound as concerns over a U.S. recession lessened significantly. The PMI score reached 51.4, indicating economic growth, and employment figures showed signs of improvement.

It appears that an immediate intervention by the Fed is not expected at present. On the contrary, there’s a strong prediction that interest rates may be reduced by 0.5% in September.

Financial markets are indicating nearly a certainty of a 0.5% reduction in interest rates by September. This prediction has led some investors to swiftly purchase stocks during this dip, but I believe this response is premature and insufficient. It becomes problematic when unexpectedly high inflation figures could decrease the likelihood of a rate cut. Therefore, it might be wise to sell off any gains (sell the rally).

— Peter Schiff (@PeterSchiff) August 5, 2024

In the midst of the current rebound in the cryptocurrency market, I find myself consistently favoring Bitcoin and Ethereum as go-to investments. These digital assets have demonstrated their resilience and value as secure havens within the ever-evolving crypto landscape.

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2024-08-06 07:30