Our experts assessed the factors that led to the fall of cryptocurrencies, as well as predicted the future behavior of Bitcoin price
Cryptocurrencies lost about 16% of their total market capitalization in the past 24 hours - the figure fell to $1.8 billion. This daily drop was one of the largest since January 2022. Since the beginning of August, the figure has lost 22%, back to the mark at the beginning of February 2024, according to Coinmarketcap.
Macroeconomic and geopolitical factors have been the most likely factors for the decline in cryptocurrency prices in recent days.
Macroeconomics, US recession and geopolitics
Most experts noted the impact of macroeconomic data and fears of escalation from geopolitical factors. Investors are now selling off high-tech assets, which include cryptocurrencies, in a panic. As they are more sensitive to market volatility, as evidenced by a rise in US jobless claims. And the decline in the index of business activity in industry, the persistence of a high key rate in the US. As well as the tension between Israel and Iran, which may turn into a conflict in the Middle East.
Also additional nervousness of investors was caused by uncertainty of actions of the Federal Reserve System of the USA in questions, which concern change of the interest rate.
The situation was aggravated by the publication of weak data on employment in the United States. It turned out that the real figures lagged far behind the forecasts and market expectations, which led to an increase in fears about a possible recession in the United States. According to the expert, the assassination of the head of the Hamas politburo, protests in Venezuela, Erdogan's threats to the Israeli authorities and deteriorating relations between Israel and Iran “do not add to investors' confidence in the future and do not inspire them to buy high-risk assets”.
Due to macroeconomic concerns, last week was marked by significant volatility on Wall Street. Major indexes and stock market futures fell sharply toward the end of the week due to growing recession expectations.
These fears intensified following the release of the U.S. jobs report on Friday, raising concerns about the sustainability of economic growth. In addition, ongoing geopolitical tensions contributed to market uncertainty and volatility.
Possible predictions
Despite concerns about macroeconomic instability and geopolitical tensions, experts do not see the fall of cryptocurrencies as a long-term risk. For example, Richard Teng said that the Binance exchange team expects the Fed to cut interest rates in September, which should improve the outlook for the US economy.
This is not to say that the cryptocurrency market will not recover again this year, but in the coming weeks we will see active action from the G7 group of central banks to prevent an international crisis. This will take the form of emergency support measures, among other things. That is, flooding the markets with liquidity, which will also support cryptocurrency. The key question now is only to what levels the market will fall to before it starts to recover on positive fundamental signals, analysts say.
However, in the coming week, many expect to strengthen the decline with possible targets for the main cryptocurrency around $43 thousand, while the market capitalization as a whole may fall to $1.5 trillion by the end of August.
Now the markets are very sensitive to any signals talking about the situation in the global economy, especially if they hint at the realization of a negative scenario. Due to the fact that bitcoin began an almost free fall to $50 thousand, the next level of support is in the neighborhood of $49-50 thousand. The rebound on the chart can be just as rapid, and by the middle of the week quotes of the main cryptocurrency may return to $58 thousand, and by the end of the week it may start trading above $60 thousand.
During such dramatic fall, the most important thing is not to panic and do not run after the market, selling all assets. Experience shows that the winner is the one who is professionally engaged in trading. Or the one who simply invests in the long term and does not touch coins on the horizon of three to five years.
