‘Intense Anxiety’ Unleashed as Crypto Market Plunge Results in $800 Million BTC, ETH, XRP, SOL Liquidations
A sense of intense anxiety is rippling through the cryptocurrency and stock markets on Monday. The highly-watched crypto fear and greed index is inching closer to the fear zone, while CNN Money’s index has already entered the fear zone at 27. Market volatility, safe haven demand, and junk bond demand have all reached the extreme fear zone, while the market momentum index is teetering on fear. Stock price breadth, on the other hand, has settled in the neutral zone.
As fear sweeps through the market, over $800 million worth of liquidations have been triggered in the crypto space. CoinGlass data reveals that bearish liquidations have skyrocketed in the past 24 hours. The majority of these liquidations have impacted major tokens like Ethereum, Bitcoin, and Solana, with other notable coins including Ripple (XRP), Pepe, Binance Coin (BNB), Avalanche (AVAX), and Filecoin (FIL) also experiencing significant liquidations. Ethereum liquidations were recorded at over $297 million, with Bitcoin following closely at over $239 million. In total, more than 200,000 traders faced liquidation during this period.
The crypto crash has been marked by a sea of red across the market, as Bitcoin plummeted to $52,000 and Ethereum experienced a 20% slump in the past day. Other popular tokens like BNB, SOL, XRP, and AVAX also saw drops of over 10% in the same timeframe.
There are several factors contributing to this ongoing crypto crash. Firstly, traders are unwinding their long-standing carry trade as the Bank of Japan (BoJ) and the Federal Reserve adopt opposing stances. BoJ’s decision to hike interest rates by 0.25% last week, coupled with weak economic data published by the US, has prompted this action. The US data indicated a rise in the unemployment rate to 4.3% in July, a significant increase from last year’s low of 3.5%. Initial jobless rates have surged, while wage growth remains stagnant. Furthermore, the manufacturing PMI report reveals that the sector is currently experiencing contraction.
Analysts now anticipate that the Fed will implement rate cuts in September, with some expecting substantial reductions. This scenario would cause traders to unwind their carry trade, wherein they borrowed yen to invest in US dollar assets. This explains the sinking USD/JPY pair.
Another reason for the drop in cryptocurrencies such as Bitcoin, Solana, Ether, and Ripple is the indication that Warren Buffett is preparing for a significant event in the stock market. Berkshire Hathaway revealed that it sold a substantial stake in Apple stock worth over $80 billion, resulting in the company possessing over $277 billion in cash on its balance sheet. Buffett’s actions indicate his belief that stocks are currently overvalued. His favored valuation gauge, which compares stock performance to US GDP, has reached extreme levels. Buffett is widely regarded as one of the top investors today, and his moves have worldwide implications. Consequently, more investors may decide to sell their stocks based on his recent actions. Cryptocurrencies have previously shown a close correlation with stocks.
Additionally, rising odds suggest that Kamala Harris could defeat Donald Trump in the November election. Having raised over $300 million in recent weeks, Harris has gained momentum in key states. PredictIt gives her a 53% chance of beating Trump. Recent polls show that Harris is outperforming Joe Biden. Her advantages include her younger age, which plays a significant role in this election, her gender, and a clean track record devoid of scandals. These factors make her appealing to independent voters. Donald Trump has positioned himself as a candidate friendly to cryptocurrencies, having supported self-custody and vowing not to allow the government to sell its holding of over 213,000 Bitcoins.
Furthermore, the decline of Bitcoin, which continues to establish lower lows and lower highs, indicates that bears are now in control. This performance has invalidated previous theories suggesting that Bitcoin was forming a bullish flag, an inverse head and shoulders pattern, and a falling broadening wedge pattern. Consequently, with Bitcoin below the 200-day moving averages, there is a risk of further decline. Altcoins tend to experience extreme movements in relation to Bitcoin.
In summary, the crypto market has been engulfed in intense anxiety, with $800 million in liquidations triggered as a result. The prevailing fear has been influenced by a combination of factors, including the unwinding of the carry trade, Warren Buffett’s actions in the stock market, the potential election victory of Kamala Harris, and the declining performance of Bitcoin.