The sharp decline in cryptocurrency prices during October 2024 came as a result of the accumulation of several economic and political factors and their direct impact on the market. The following is a more accurate analysis of these factors:
1. Global macroeconomic concerns:
Possible recession in the US economy: Economic data released from the US showed a weak labor market, with high unemployment rates and low economic growth. This created a state of anxiety among investors who saw cryptocurrencies as a high-risk asset, and thus withdrew their investments.
Japanese interest rate policy: The Bank of Japan’s decision to raise interest rates has had a major impact on global financial markets. The surprise rate hike has led to massive sell-offs in assets, including cryptocurrencies, due to the liquidity impact on investors who relied on Japanese yen debt.
2. Organizational tensions:
Tightening Regulation in the US: The US Securities and Exchange Commission (SEC) has continued to crack down on digital platforms and major exchanges like Binance and Coinbase. These policies have created legal uncertainty and negatively impacted investor confidence, prompting many to liquidate their cryptocurrency positions.
3. Digital market volatility and forced liquidation:
Margin calls: During August and October, the market experienced waves of margin calls, with liquidations amounting to hundreds of millions of dollars in a single day. These liquidations were the result of high levels of debt and forced selling due to sudden declines in currency prices.
4. Decrease in the total market value of cryptocurrencies:
The market cap of cryptocurrencies dropped by a significant 13.1% in August, and the impact continues into October 2024. Bitcoin and Ethereum, two of the largest digital currencies, saw notable declines of 11.1% and 24.9%, respectively.
5. Technical factors and security breaches:
Decline in DeFi activity: Decentralized systems like DeFi have seen their total value locked (TVL) drop by over 15%, as capital flows out of projects based on Ethereum and Solana. This decline has led to a decrease in demand for the cryptocurrencies used in these systems.
Security breaches and fraud: A number of digital projects and platforms have been subjected to cyber attacks and fraud, which has increased investor skepticism and contributed to the decline in currency prices.
Therefore, it can be said that the combination of these economic, political and regulatory factors has led to a significant decline in the digital market, negatively impacting the prices of major digital currencies such as Bitcoin and Ethereum.
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