The recent downturn in the crypto market can be attributed to several key factors:
1. Bank of Japan's Interest Rate Hike:
On July 31, 2024, the Bank of Japan increased its interest rate to 0.25%, which led to a significant appreciation of the yen. This disrupted the carry trades, where investors borrowed yen at low rates to invest in higher-yielding assets like cryptocurrencies. The sudden increase in borrowing costs forced many investors to unwind their positions, leading to a broader market sell-off.
2. Leveraged Position Liquidations:
The rapid decline in crypto prices triggered a cascade of liquidations in leveraged trading positions. Over $1 billion in leveraged crypto positions were liquidated within 24 hours, exacerbating the downward pressure on prices.
3. Geopolitical and Economic Concerns:
Weak economic data from the US, including disappointing job reports, fueled fears of a potential recession. Additionally, geopolitical tensions, such as those related to Iran, have further contributed to market instability and reduced investor appetite for riskier assets like cryptocurrencies.
4. Technical Market Factors: From a technical analysis perspective, the crypto market entered a bearish phase with a descending triangle breakdown. This pattern typically signals further declines, adding to the negative sentiment among traders.
Despite these challenges, some experts believe there is potential for a market rebound. Historical patterns suggest that after significant downturns, cryptocurrencies like Bitcoin have the potential to recover and even enter new bullish cycles.
Good Luck 🤞
