Over the past few days, global stock markets have been plummeting. Trading screens across the US, Asia, and Europe are filled with blinking red numbers heading south. The sudden turn comes as fears grow that the US economy, the world’s biggest, is slowing down. Experts say the main reason for this fear is that US jobs data for July, released on Friday, was much worse than expected.
‘Yen Carry Trade’ Blamed for Global Market Rout, Jump Crypto’s ETH Sale Worsens Ether Plunge – Markets and Prices Bitcoin News: Some experts cite the disappointing U.S. jobs data and Mt. Gox-related selling as factors contributing to… https://t.co/9gkzy0EmtU ➡️Spotted for you
— News by Amanda (@amandasome) August 5, 2024
For some, talk of an economic slowdown—or even a recession—is premature. US employers created 114,000 jobs in July, which was below expectations of 175,000 new roles. The unemployment rate rose to 4.3%, a near three-year high, triggering the “Sahm rule.” Named after economist Claudia Sahm, the rule suggests that if the average unemployment rate over three months is half a percentage point higher than the lowest level over the past 12 months, the country is at the beginning of a recession.
Adding to these concerns was the fact that the US Federal Reserve voted last week not to cut interest rates. Other central banks, including the Bank of England and the European Central Bank, have recently cut rates. The Fed held borrowing costs, but its chair, Jerome Powell, indicated that a rate cut in September is possible, leading to speculation that the Fed waited too long to act. A cut in rates would theoretically boost the economy by making borrowing cheaper.
Technology companies and their share prices also felt the impact. There has been a long-running rally in their shares, fueled by optimism over artificial intelligence (AI). Last week, Intel announced it was cutting 15,000 jobs, and rumors suggested that Nvidia might delay the release of its new AI chip. This caused a significant selloff on the Nasdaq, the technology-heavy US index, which plunged by 10% on Friday. This fear spread across markets, prompting concerns about broader financial stability.
Bitcoin tumbles as risk assets plunge in global market rout
BTC: 54346 USD, 24h Change: -7.59%https://t.co/ZCg1zCkPVn— Crypto News by cry-pto.news (@cry_pto_news) August 5, 2024
Amid these economic concerns, Bitcoin traded 8% lower at $54,653, adding to a 13.1% drop last week. Ether shed over a fifth of its value before stabilizing at $2,440. Most major coins nursed losses. Crypto-related stocks tumbled, with Coinbase falling more than 20%, MicroStrategy plunging almost 30%, and miners Marathon Digital and Riot Platforms slumping as much as 20% and 15%, respectively.
Total liquidation in crypto bets was about $1.2 billion in the past 24 hours, one of the largest since early March this year. US exchange-traded funds for Bitcoin suffered their largest outflows in about three months on Aug. 2. Overall, Bitcoin and Ether investment products saw outflows of $400 million and $146 million, respectively, in the week ended Aug. 3.
Economic and geopolitical factors are adding to the market instability. Rising geopolitical tensions in the Middle East contribute to investor skittishness. Meanwhile, the unwinding yen carry trade and higher interest rates in Japan are causing additional pressure on digital assets.
Despite the selloff, some analysts suggest the market is oversold and indicate a potential rebound. Indicators like the Crypto Fear and Greed index flashing ‘Fear’ usually signal a bottoming of the price. Bitcoin’s year-to-date advance has moderated to approximately 21%, compared with an 18% climb in gold and an 8% jump in a gauge of global stocks.
Key Points:
i. Bitcoin and Ether Drop Significantly: Bitcoin fell 8% to $54,653, adding to a 13.1% drop from the previous week, while Ether shed over 20% before stabilizing around $2,440.
ii. Crypto-Related Stocks Tumble: Stocks like Coinbase, MicroStrategy, Marathon Digital, and Riot Platforms faced significant declines due to the broader market selloff.
iii. Market Liquidations and Outflows: Total liquidation in crypto bets reached $1.2 billion in 24 hours, and Bitcoin and Ether investment products saw outflows of $400 million and $146 million, respectively.
iv. Economic and Geopolitical Factors: Rising geopolitical tensions and concerns over the economic outlook, including the impact of heavy investment in AI, contributed to market instability.
v. Potential for Rebound: Despite the selloff, some analysts suggest the market is oversold and indicate a potential rebound, with indicators like the Crypto Fear and Greed index flashing ‘Fear’.
Lap Fu Ip – Reprinted with permission of Whatfinger News
