I am not confident we are over with the move yet. Yesterday's slump in the US stock markets was felt by cryptocurrencies as well leading to some cascades overnight. The sudden move just a few minutes ago, likely was a large scale liquidation.
No I don't think it's exchanges and mass institutions dumping because if so, we'd see much larger declines I promise you that. The primary driver of such a large scale decline across both US equities and cryptocurrency are largely macroeconomic factors. Why? Because cryptocurrencies are dollarised and trade with prices relative to the US dollar.
I've long harped on the fact that US markets have severely overly priced in rate cuts. It was bound to happen and by correlation spilled down into cryptocurrencies too. My model previously estimated an implied interest rate of 4.25% which is an unrealistic cutting pace. Not just in September, but the year as a whole. I'll run it again when I'm back home but we are likely not done with the move down yet.
Valuations. Valuations are trading at the highest multiples we've ever seen. Why is this? The fact there is genuine value, genuine growth potential, but to a large extent as well, irrational exuberance. In other words, a bubble. Now, I can't say with confidence if the bubble has burst or this is just a leak, but I don't think the overall trend is a particular strong bullish one in the months to come. The primary culprits of high valuations are the AI stocks. They have such a high growth demand to justify the valuations that it is unlikely to be realistically sustainable.
These are just some of my thoughts. I know they are a little messy and someone is probably going to try and repost it, but I hope you guys can find some good value.
