According to AICoin data, in the past 24 hours, the total market liquidation amount reached US$817 million, of which BTC liquidation was US$271 million, accounting for 33.13%; ETH liquidation was US$267 million, accounting for 32.71%. SOL, DOGE, and XRP all had liquidations of more than 10 million US dollars, ranking the top five on the liquidation list.
1. Japan raises interest rates, and stock indexes in many countries are triggered
Last Wednesday, the Bank of Japan announced an interest rate hike, raising the policy rate from 0% to 0.25%, sending a strong hawkish signal. As a result, the Japanese stock market plummeted for three consecutive days, and the Tokyo Stock Exchange Index and Japanese government bond futures triggered the circuit breaker mechanism.
Changes in Japan's interest rates have triggered international market expectations of a decline in the Bank of Japan's demand for borrowing yen, and the trillion-dollar arbitrage trading market has been affected by panic.
In the carry trade market, investors borrow low-interest currencies (such as the Japanese yen) and then invest in high-yield assets (such as stocks and high-interest bonds in other countries). When the Bank of Japan raises interest rates, the cost of borrowing yen increases, which reduces the profits of these carry trades or even turns them into losses, which will cause investors to reduce their positions and close their positions, thereby creating selling pressure on high-yield assets around the world. Especially in emerging markets, the outflow of funds that rely on carry trades will cause stock markets in these markets to fall and volatility to rise. According to the financial market view, if the Bank of Japan raises interest rates, the government will have to start paying money to all banks, and the profitability of carry trades will quickly begin to reverse.
At the same time, the Bank of Japan's interest rate hike means the appreciation of the yen, and the economies of countries that are closely linked to the Japanese economy will also be affected to a certain extent.
According to market data, the South Korean GEM index plummeted 8% and triggered the circuit breaker mechanism. Trading was suspended for 20 minutes. After the resumption of trading, the decline widened to 9%. Samsung's stock price hit the biggest drop since 2020, and many stocks such as Kia Motors, SK Hynix, Hyundai Motor and Cellun fell by more than 3%. U.S. stock futures continued to fall, with the Nasdaq 100 index futures falling by 2%, the S&P 500 index futures falling by more than 1%, and the U.S. 2-year Treasury yield falling to the lowest level since May 2023. The Australian market was also affected, with the S&P/ASX 200 index opening down 2.3% on Monday.
2. Macroeconomic indicators deteriorated
Last Friday, the non-farm data released by the United States was unexpectedly cold, with the number of new jobs falling to 114,000 and the unemployment rate climbing to a new high since December 2021, reaching 4.3%, triggering the Sam's Rule (an indicator for predicting economic recession). U.S. stocks and U.S. bonds fell across the board, and the crypto market, which is highly correlated with the U.S. stock market, fell synchronously.
The non-farm data that did not meet expectations triggered market concerns about a hard landing of the US economy. Bond traders believed that the US economy was on the verge of deterioration and predicted that the Federal Reserve would need to start easing monetary policy aggressively to avoid a recession. Institutions such as JPMorgan Chase and Citigroup have also adjusted their expectations for rate cuts, betting that the Federal Reserve will cut interest rates by 50 basis points in September.
In addition, some people pointed out that the previous concerns of the US stock market about high inflation have basically disappeared, and quickly gave way to new concerns that the economy will stall unless the Federal Reserve lowers interest rates.
3. Market Makers Selling at a Large Scale
Market maker Jump Trading liquidated some positions and sold ETH worth $69.17 million in the past 48 hours. The selling behavior of the institution further exacerbated the panic in the market when the expectation of interest rate cut turned into economic recession.
Previously, BitMEX co-founder posted that a "big guy" fell and sold all crypto assets. The market speculated that this might be a reference to Jump Trading.
4. ETFs see net outflows again
On Friday, spot ETFs saw net outflows again:
• Spot BTC ETF: Net outflow in a single day reached US$237 million, of which Fidelity outflow exceeded US$100 million and ARK 21Shares outflow was US$87.7 million;
• Spot ETH ETF: Net outflow of US$54.27 million in a single day, of which Grayscale continued to sell its ETHE holdings, selling US$61.43 million.
Current Market Conditions
The market is currently experiencing intensifying divergences. On the one hand, there are long-term positive factors supporting the market, such as the US election, expectations of interest rate cuts by the Federal Reserve, and ETF prospects. On the other hand, negative factors such as pessimistic macroeconomic expectations, potential selling pressure from Mt.Gox, and geopolitical conflicts are looming, and market risk aversion is rapidly heating up.
Another point to note is that in the past, the threshold for the US-Japan interest rate differential at which the USD/JPY trend turned downward after an upward trend was about 4.75%. Currently, this differential is about 5.25%. To reach this level, the Federal Reserve may need to cut interest rates three times, and the entire process will take about six months.
SOL Market Analysis
$SOL
I see many people privately asking whether to enter the market to buy at the bottom. My uniform reply is that BTC ETH and SOL should also be carried out in batches with light positions. Let’s talk about SOL first. This is also the one that appears most in our posts.
SOL has been trading in a wide range between $116 and $210 for a few months, suggesting buying on dips and selling on rallies.
The bears have pulled the price below the moving averages but SOL is likely to find support in the $127 to $116 zone. If the price rebounds off the current levels or the support area, it will likely face selling at the 20-day EMA ($162).
Another possibility is that a breakout and close above the 20-day EMA would open the door to a rally to $188, which is also a short-term approach.
In addition, in the long term, we should pay attention to the chip range of 0.382. At this position, we can directly enter the spot. The 188-162 mentioned above is also the operation range of the band. I personally suggest that you should not easily sell when entering the market at this time. Our target remains unchanged, the range of 235-252
