Good day everyone,
I hope you are all having a good day, welcome to CryptoGod-1's blog on all things crypto. In this post I will be looking at potential reasons why crypto has seen a massive crash over the previous day.
Crypto Crashing
The 5th of August 2024 could well become known as the "Black Monday" of Cryptocurrency. The most popular and steadfast coins such as Bitcoin and Ether, along with other assets, saw a major downturn due to widespread risk aversion in global markets. At the time of writing Bitcoin had slipped as low as $49,221, but saw a rebound to currently trade for $54,665.50.
The decline marks the largest drop in Bitcoin's price since the collapse of FTX in November 2022, and followed a trend from the previous week where the token drop 13.1%. Similar trends have been seen in Ether, as it dropped to a low of $2,171.25 but currently trades for $2,488.11. This marks a total loss of more than 30% over the past week, also making it the sharpest drop for Ethereum since 2021. The entire crypto market has dropped around 12% in the previous 24 hours.
Many investors are becoming increasingly worried about the likelihood of a United States recession, and this has also been exacerbated by the rising tensions in the Middle East. Much economic uncertainty and global instability has led to a risk assessment and selling of assets among investors.
With unexpectedly low job growth during the month of July, along with an unexpectedly high unemployment rate, a market slowdown has been indicated in the labour market across the United States. With recession fears increasing, this lead to a 2.43% drop in the Nasdaq and a 1.84% drop in the S&P 500.
A report which came from QCP Group, a prominent Singaporean digital asset trading firm, directly linked the crash with aggressive selling by Jump Trading. Their sell-off sent a number of shockwaves throughout the crypto ecosystem, and it resulted in the crashing of Bitcoin and Ethereum as shown above.
In a separate report by blockchain analytical platform Spot On Chain, they noted that Jump Trading moved 17,576 ETH worth around $46.79 million to a number of exchanges over the weekend. They also converted 83,091 wstETH (worth $341 million) into 97,600 stETH and unstaked 86,059 stETH (valued at $274 million) from Lido Finance. All of this resulted in a net deposit of 72,213 ETH, equivalent to $231 million, into multiple exchanges.
All of these massive transfers means Jump Trading still hold a substantial crypto holding, according to Arkham Intelligence data, which shows that the firm still holds approximately 37,604 wstETH and 3,214 RETH, valued at around $110 million. Another wallet associated with Jump Trading holds about $585 million in cryptocurrencies, which is mainly in USDC and USDT.
Blockchain analyst Lookonchain reported that the market has dropped over 33% since the firm began its selling spree back on the 24th of July this year. Much criticism has been laid at the firm for their sell-off, with Jump Trading's liquidation of assets into the market during the summer showing the vulnerabilities of the market.
Some have also indicated that the shift in market sentiment is in part due to the diminishing impact of the Trump rally along with the increased election odds for Kamala Harris winning the presidential election in the United States. Several other global events have taken place recently which have also shaped the recent downturn. Bank of Japan have increased their interest rate to its highest level in 16 years in a move which surprised many. Uncertainty in the potential of a September rate cud by the US Fed is also causing nervousness amongst investors.
Bitcoin exchange-traded funds (ETFs) have seen their largest outflow of cash in three months, while the large-scale withdrawal is being driven by speculation about the potential for a new bear market. Many investors are waiting to see if the ETFs will attract new investors at the lower prices, or if selling pressure will continue.
Investors must also consider the role macroeconomics have to play in the volatility. Warren Buffett’s Berkshire Hathaway sold approximately 50% of its Apple holdings, which many consider a potential hedge against any upcoming market downturns. At one point their portfolio had a staggering 43% of their funds in Apple shares. The previously noted lack of new jobs created in the United States meant only 114,000 new jobs were created instead of the expected 175,000.
All of these factors have contributed to the downturn in price and for now the future remains unclear. For now DeFi has stood strong in the face of adversity, as many DeFi protocols including Aave have reported substantial revenue generation during these turbulent times. The protocol reported a revenue of $6 million overnight due to market stress. Much of this came from liquidations, as over $1 billion was liquidated in the overall crypto derivatives markets and an additional $350 million in DeFi protocols. Aave accounted for a $7.4 million wrapped ether (WETH) position that yielded $802,000 in revenue for the protocol among its incomes.
Have a great day.
Peace. CryptoGod-1.
Referral Links and Follow Me:
