In a crash that traders are referring to as “Crypto Black Monday”, a global stock market rout has sent the price of major cryptocurrencies careening lower, with the Bitcoin (BTC) price at one point dropping below $50,000 for the first time in February.
The Bitcoin price had last rebounded to above $54,000, down roughly 10% in the past 24 hours per CoinMarketCap.
BTCUSD / Source: TradingViewBut most other major cryptos were nursing losses in the region of 20% in the past 24 hours.
Indeed, Ethereum (ETH) was down 20% to the $2,300s. No surprise then that the term “crypto black Monday” is trending on X.
#Bitcoin just sank below $58K. If it takes out it’s July low by tomorrow’s U.S. #StockMarket open, #BitcoinETFs will gap down by more than 15%, 30% below their Jan. highs. A loss of that magnitude may finally trigger mass ETF liquidations. If so, brace for a #Crypto black Monday.
— Peter Schiff (@PeterSchiff) August 4, 2024
Stock indices around the world also dropped sharply.
The Nasdaq 100 futures tumbled over 3.5%, but were at one stage down 6.5%, per TradingView.
Japan’s Nikkei 225, meanwhile, was last down 6%, but at one stage had fallen 13%. So, what has caused crypto black monday?
These Are the Catalysts Behind Crypto Black Monday
Well, two major catalysts have combined to batter sentiment.
Firstly, traders are panicking about a potential US recession/global slowdown in wake of last week’s concerning US jobs data.
They are also concerned that the Fed might be “behind the curve” and cut interest rates too slowly to support growth.
The Federal Reserve was too slow to raise rates. Now it is too slow to lower them.
— Bill Ackman (@BillAckman) August 5, 2024
The other major bearish catalyst in the market is the unwinding of the famous pro-risk Japanese yen carry trade.
If you are still wondering why the hell the markets are crashing:
The Bank of Japan (BoJ) unexpectedly raised interest rates after a prolonged period of keeping them at 0%. As a result, the Japanese yen appreciated, leading to the collapse of the yen carry trade. This trade…
— Yuriy Matso (@yuriymatso) August 5, 2024
Borrowing the low-interest rate yen to fund investments in higher risk/yielding assets has been an over-saturated trade for years.
But the BoJ hiked interest rates by 25 bps last week, more than expected.
That has sent the yen surging in recent sessions – it is now up 11% from last month’s lows.
Rising Japanese interest rates and the appreciating yen appear to be forcing some to close out their yen-carry trade positions. This is hurting risk assets across the board.
Is the Crypto Bottom In?
Last above $54,000, the Bitcoin price has already bounced nearly 9% from earlier session lows.
Does that mean the bottom is in? Is crypto black Monday over?
Well, that’s impossible to know for sure. In a highly volatile market like this, its impossible to pick a bottom with any certainty.
People who get in at the bottom usually do so with a very healthy dose of luck.
That said, the conditions for some stabilization of the market in the immediate future could be there.
US ISM Services PMI data for July just came in at a reasonably healthy level, suggesting that recession is not here yet.
woah, maybe the US economy is not crashing?
ISM services employment up 5 points to 51.1. Entire PMI in expansion pic.twitter.com/7uiK3CC8yF
— Eric Wallerstein (@ericwallerstein) August 5, 2024
That could help to keep some heads cool about the prospect of an imminent recession.
Then there is also the prospect of the Fed – what are they going to do, if anything, to combat recent market turmoil.
Wharton’s Jeremy Siegel was just on CNBC calling for an emergency 75-bps rate cut right now, and then another 75-bps rate cut in September.
“I’m calling for a 75 basis point emergency cut in the Fed funds rate, with another 75 basis point cut indicated for next month at the September meeting – and that’s minimum,” says Wharton’s Jeremy Siegel: pic.twitter.com/s4CgWx962Q
— Squawk Box (@SquawkCNBC) August 5, 2024
An emergency cut is unlikely. But Fed policymakers could attempt to cool panic in the market this week when they speak publicly.
Stabilization in the low $50,000s following crypto’s black Monday could be the theme of the rest of the week for Bitcoin
Looking to the weeks ahead, however, it’s impossible to say if the bottom is in.
In a worst-case scenario – more US data points to recession but the Fed remains too slow to react. And that could see Bitcoin tumble towards $40,000 or even lower.
Generational Buying Opportunity?
But any such dip to those sorts of levels could be a generational buying opportunity.
If recession is coming and the Fed realizes that it is behind the curve, what comes next?
Huge rate cuts, possible quantitative easing, and a probable big dose of fiscal stimulus (i.e. spending) from the US government.
That means currency debasement, and that means good things for assets that are deemed as protective against currency debasement – gold and Bitcoin.
That could be the catalyst for a parabolic crypto comeback and Bitcoin mooning above $100,000.
It will be tough to pick the bottom. But whether an investor got in at $30,000, $40,000 or $50,000 won’t matter too much once Bitcoin surges above $100,000.
Alternative Investment to Consider
In a crypto market crash, buying the dip is a good long-term strategy, but it can leave investors out of pocket in the short term.
For those seeking shelter from price volatility in the short-term, one investment strategy to consider is investing in presales.
Web3 start-ups frequently raise funds via native token sales in their early stages. These funding raising rounds normally last a few weeks-months, and often come with a nice staking yield.
One presale that analysts at Cryptonews.com are a big fan of right now is Pepe Unchained (PEPU).
Cryptonews.com’s in-house presale analysts Chester explains what the project is all about below.
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