Original author: Chandler, Foresight News
The latest data released last Friday showed that the US unemployment rate rose in July, triggering close attention to economic recession indicators, which in turn led to the spread of recession fears around the world, and global capital markets saw a sharp decline on Monday. The Nikkei fell 4,451 points, the largest drop in the Japanese stock market, surpassing the record of 3,836 points after the US stock market crash on October 20, 1987. South Korea's benchmark Kospi index and small-cap Kosdaq index fell more than 8%, triggering the circuit breaker mechanism, setting the largest single-day drop since 2008. The Nasdaq 100 index futures fell more than 5%, and European stocks opened lower and fell, with the Euro Stoxx 50 index falling more than 3%.
The crypto market is also at risk of falling simultaneously. BTC was not supported after falling below $60,000, and fell all the way to $50,000, hitting a low of around $49,000, with a daily drop of more than 15%. ETH fell by more than 20% in 24 hours, once falling below $2,200, wiping out all gains in 2024. According to CMC market data, the total market value of cryptocurrencies across the entire network fell to as low as $1.76 trillion, a 24-hour drop of nearly 20%.
Against the backdrop of global market turmoil, the tragedy of the March 12 incident seems to have reappeared. Market frontline institutions and analysts expect that it is more reasonable for the Federal Reserve to cut interest rates twice by the end of 2024. The market is concerned about falling interest rates and an economic recession. The plunge in Bitcoin prices often occurs almost simultaneously with the decline of the Nasdaq 100 Index. Some have reduced their positions but have not withdrawn from the crypto market. They are still bullish in the long term and focus on technology, industry and adoption.
Zhu Haokang, head of digital asset management at China Asset Management (Hong Kong) and founder of the Asian RWA Working Group, made a detailed comparison between the price of Bitcoin and the Nasdaq 100 Index, concluding that the plunge in the price of Bitcoin often occurs almost simultaneously with the decline in the Nasdaq 100 Index, especially when the market faces widespread systemic risks, such as the market plunge caused by the COVID-19 pandemic in March 2020 and the market adjustment in 2022. At other times, Bitcoin's fluctuations are more like independent events, although they will also have a certain impact on market sentiment.
Figure 1: MVRV (Market Value to Realized Value) refers to the ratio of BTC market price to the overall average purchase price of BTC on the chain. In the figure, MVRV considers BTC on the chain that has not been moved for more than 7 years as long-term dormancy or loss and excludes it from the calculation. The black line in the figure is the [22 years - present] segment of the BTC: MVRV indicator; the blue line is the [18-21 years] segment of the BTC: MVRV indicator; the red line is the [14-17 years] segment of the BTC: MVRV indicator. The three lines align the halving day of BTC mining output in each cycle.
Figure 2: The time relationship between the Bitcoin price crash and the Nasdaq 100 index decline over the past 16 years, as well as the specific decline:
The 2013 Bitcoin Crash
Bitcoin price crash: December 2013
Bitcoin’s decline: From over $1,100 to around $500, a drop of about 55%
Nasdaq 100 decline timing: No significant related declines
Time relationship: No obvious relationship
The Bitcoin crash in 2017-2018
Bitcoin price crash: December 2017 - February 2018
Bitcoin’s decline: From nearly $20,000 to around $6,000, a drop of about 70%
Nasdaq 100 down: February 2018
Nasdaq 100 decline: A brief correction of about 10%
Time relationship: Almost synchronous
The March 2020 COVID-19 market crash
Bitcoin price crash: March 2020
Bitcoin’s decline: From about $10,000 to about $4,000, a drop of about 60%
Nasdaq 100 down: March 2020
Nasdaq 100 down: about 30%
Time relationship: Synchronous
Bitcoin crash in May 2021
Bitcoin price crash: May 2021
Bitcoin’s decline: From about $64,000 to about $30,000, a drop of about 53%
Nasdaq 100 down: May 2021
Nasdaq 100 decline: A brief correction of about 5%
Time relationship: Almost synchronous
Cryptocurrency market crash in 2022
Bitcoin price crash time: May 2022 - June 2022 Bitcoin decline: from about US$40,000 to about US$20,000, a drop of about 50%
Nasdaq 100 decline period: Early 2022 - June 2022
Nasdaq 100 down: about 30%
Time relationship: Almost synchronous
Hayden Hughes, head of cryptocurrency investments at family office Evergreen Growth: Crypto assets have become part of the victims of the unwinding of yen carry trades
Crypto assets have been some of the victims of the unwinding of yen carry trades as speculators adjust to higher interest rates in Japan, while those investors are also dealing with a sharp rise in hedging costs due to fluctuations in the dollar-yen exchange rate.
Daniel Tan, portfolio manager at Grasshopper Asset Management: Two Fed rate cuts by the end of 2024 are more reasonable
We believe that five Fed rate cuts by the end of 2024 are unlikely. Two rate cuts are more plausible, one in September and one in November, for a total of 75 basis points by the end of the year. This suggests a potential opportunity to add bonds in the coming months. Overall, we believe that emerging market bonds will perform well by the end of the year in an environment of gradually falling interest rates. Prior to the recent sell-off in early August, we were cautious about chasing the global stock market rally, which was mainly driven by a surge in global technology stocks. Given the sharp rise in technology stocks earlier this year and investors seeking to sell assets to cover losses, the recent stock market sell-off may still have room to continue.
George Bourbouras, head of research at K 2 Asset Management in Melbourne, said the reaction to the jobs data seemed overdone.
Markets are clearly concerned about recent weak economic data. However, extrapolating last Friday's employment data seems to be an overreaction as it is only a monthly data. A 3-month rolling data would be a better guide. It is clear that recent US economic momentum has slowed. Recent improvements in US core inflation data, coupled with some comments from the Fed, have markets expecting a 25 basis point rate cut in September. The days of ultra-low US cash rates are over. Despite market volatility and some concerns that recent weakness in economic data will continue, overall earnings and credit conditions remain good. Given that the Fed is expected to start cutting rates before the US election (November 5th) (implied futures), while a rate cut is warranted, on the surface, it may be problematic. This could exacerbate market volatility in the run-up to the election.
Min Jung, an analyst at Presto Research: The crypto market fell due to factors such as employment data that fell short of expectations, recession concerns, and large transfers from Jump Crypto
The decline in Bitcoin and Ethereum can be attributed to several factors. First, the employment data released last Friday was significantly lower than expected, with only 114,000 jobs added, which exacerbated concerns about a recession. The news over the weekend that Buffett's Berkshire Hathaway sold nearly half of its holdings in Apple in the second quarter may also put further pressure on the stock market. In addition, over the weekend, Jump Crypto, the crypto division of Jump Trading, appeared to begin transferring hundreds of millions of dollars worth of crypto assets, including Ethereum and USDT. This led many to speculate that the company may be liquidating its crypto assets amid the US CFTC's investigation. Jump Trading has been transferring ETH to a CEX because there are rumors that they may be forced to exit the crypto business due to the CFTC's investigation.
Crypto analyst Lark Davis: I have reduced my position but have not exited the crypto market. There may be better opportunities to buy at the bottom later.
I am reducing the risk of a portion of my portfolio. The main reasons include: 1. I am paranoid about the risk of collateral liquidation on BTC and ETH loans; 2. A large part of my net assets is in crypto, leaving a small cash position, which needs to change; 3. For capital preservation. I know it is best to buy on dips now, and the current oversold levels are likely to be the first real buying opportunity in the market, and I can take advantage of this opportunity if I have the funds on hand. Although many people have been catching flying knives in the past 72 hours. But remember that there are uncertainties in the Japanese market, the US market, and Iran, and these uncertainties may still bring more attractive opportunities. I still hold a large amount of cryptocurrencies. I have not completely exited the market.
Justin dAnethan, Head of Business Development for Asia Pacific at Keyrock, a crypto market maker: The current market is not led by BTC
Unlike in the past, this market is driven by sentiment rather than Bitcoin, of course, this is due to Ethereum spot ETF trading and large investors unwinding their ETHE (Grayscale ETH Fund) positions. From a larger time frame, the interest rate environment, the possibility of Trump's election victory, and the redemption selling pressure from Mt.Gox also put pressure on the cryptocurrency market.
10x Research: Bitcoin may fall to $42,000
A break below the $55,000 support line is expected, which could push prices down to $42,000. In this case, Ethereum could drop below $2,000. While this may appear extreme to some, the continued weak market structure, on-chain data, and our cycle analysis suggest that further pressure will come in the future.
Andrew Kang, co-founder of Mechanism Capital: Bitcoin below $50,000 is extremely cost-effective
I would not bet on ETH to fall further. It may fall further, but it is better to focus on finding future buying opportunities. Don't cry because it is over. I am neither bullish nor bearish on ETH. I think it is unclear where it will go next, and the risk/reward of betting on it may not be very good. Whatever happens in the short term, Bitcoin below $50,000 is extremely cost-effective
Circle co-founder and CEO Jeremy Allaire: Still bullish on technology, industry and adoption
I am as bullish (on the crypto sector) as I was six weeks ago. Focus on the technology, the sector, and adoption. Don’t focus on the price of digital commodities in the face of global macro volatility unless you are just trading.
Bitwise CEO: Now is the beginning of an “incredible bull run” for Bitcoin
As hard as it is to imagine, in the future we will look back on today as the place where Bitcoin’s “incredible bull run” began. With interest rates falling and fears of a recession looming, the vast amount of dollars invested in stocks and fixed income will seek to flow into other assets.
